Scenario 2: Two mutually exclusive projects (Project A and Project B) are being evaluated. Both projects require an initial investment of $100,000. The expected cash flows for each project are as follows: Project A: Year 1: $40,000 Year 2: $30,000 Year 3: $25,000 Year 4: $15,000 Project B: Year 1: $25,000 Year 2: $35,000 Year 3: $40,000 Year 4: $20,000 The company's cost of capital is 10%. Required: 3. Calculate the NPV for both Project A and Project B using the provided cost of capital. (Round to the nearest whole dollar) 4. Considering only NPV, which project would you recommend, and why? Bonus Challenge: (This question requires a financial calculator or spreadsheet with IRR function) 5. Calculate the IRR for Project A and B. (Note: You can mention that a financial calculator or spreadsheet is required for this calculation) 6. Considering only 1 project to be prioritized, which project will you recommend?
Scenario 2: Two mutually exclusive projects (Project A and Project B) are being evaluated. Both projects require an initial investment of $100,000. The expected cash flows for each project are as follows: Project A: Year 1: $40,000 Year 2: $30,000 Year 3: $25,000 Year 4: $15,000 Project B: Year 1: $25,000 Year 2: $35,000 Year 3: $40,000 Year 4: $20,000 The company's cost of capital is 10%. Required: 3. Calculate the NPV for both Project A and Project B using the provided cost of capital. (Round to the nearest whole dollar) 4. Considering only NPV, which project would you recommend, and why? Bonus Challenge: (This question requires a financial calculator or spreadsheet with IRR function) 5. Calculate the IRR for Project A and B. (Note: You can mention that a financial calculator or spreadsheet is required for this calculation) 6. Considering only 1 project to be prioritized, which project will you recommend?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 2PA
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