EcoSolutions is analyzing two projects with the following net cash flows. The required rate of...
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EcoSolutions is analyzing two projects with the following net cash flows. The required rate of return is 9%. (PV of $1 = 0.917, PVIFA of $1 = 3.890, FV of $1 = 1.090, FVA of $1 = 4.395)
Year | Project E Cash Flow | Project F Cash Flow |
0 | $(900,000) | $(600,000) |
1 | $250,000 | $200,000 |
2 | $300,000 | $250,000 |
3 | $350,000 | $300,000 |
4 | $400,000 | $320,000 |
5 | $450,000 | $350,000 |
a. Calculate the payback period for each project. Which project should be selected based on the payback period?
b. Calculate the net present value for each project. Which project is preferable based on the net present value?
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