Essay About Exclusive Projects And Required Rate Of Return

Cash Flow Case
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a. Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows:
YEAR PROJECT A PROJECT B
0 −$100,000 −$100,000
1 32,000 0
2 32,000 0
3 32,000 0
4 32,000 0
5 32,000 $200,000
The required rate of return on these projects is 11 percent.
a. What is each projects payback period?
Project A – need 32,000, made 100,000 1st year 100,000/32000 = 3.125 years |
Project B – need 20,0000, made 20,000 5th year 20,000/10000=.50 = 4.5 years |
12b. What is each projects net present value?
Project A Project B
-100,000 -100,000
32,000 0
32,000 0
32,000 0
32,000 0
32,000 0
32,000 200,000
R = .11
118,268.7-100,000=18,268.7
Project B NPV
-100,000 + 200,000(1.11)5=