P10-21 (similar to) All? techniques, conflicting rankings???Nicholson Roofing? Materials, Inc., is considering two mutually exclusive? projects, each with...

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Finance

P10-21 (similar to)
All? techniques, conflicting rankings???Nicholson Roofing?Materials, Inc., is considering two mutually exclusive? projects,each with an initial investment of
?$150,000.
The? company's board of directors has set a? 4-year paybackrequirement and has set its cost of capital at
7?%.
The cash inflows associated with the two projects are shown inthe following? table:
LOADING...
.
a. Calculate the payback period for each project. Rank theprojects by payback period.
b.??Calculate the NPV of each project. Rank the project byNPV.
c.??Calculate the IRR of each project. Rank the project byIRR.
d.??Make a recommendation.
a.??The payback period of project A is
nothing
years.?
Cash inflows
?(CFt?)
Year
Project A
Project B
1
?$50,000
?$65,000
2
?$50,000
?$60,000
3
?$50,000
?$40,000
4
?$50,000
?$40,000
5
?$50,000
?$40,000
6
?$50,000
?$40,000

Answer & Explanation Solved by verified expert

4.3 Ratings (922 Votes)

a Payback period Project A Payback period of project A Initial investment cash flow Payback period of project A 150000 50000 Payback period of project A 300 years Project B Cumulative cash flow for year 0 150000 Cumulative cash flow for year 1 150000 65000 85000 Cumulative cash flow for year 2 85000 60000 25000 Cumulative cash flow for year 3 See Answer

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P10-21 (similar to)All? techniques, conflicting rankings???Nicholson Roofing?Materials, Inc., is considering two mutually exclusive? projects,each with an initial investment of?$150,000.The? company's board of directors has set a? 4-year paybackrequirement and has set its cost of capital at7?%.The cash inflows associated with the two projects are shown inthe following? table:LOADING....a. Calculate the payback period for each project. Rank theprojects by payback period.b.??Calculate the NPV of each project. Rank the project byNPV.c.??Calculate the IRR of each project. Rank the project byIRR.d.??Make a recommendation.a.??The payback period of project A isnothingyears.?Cash inflows?(CFt?)YearProject AProject B1?$50,000?$65,0002?$50,000?$60,0003?$50,000?$40,0004?$50,000?$40,0005?$50,000?$40,0006?$50,000?$40,000

Cash inflows ?(CFt?)
Year	Project A	Project B
1	?$50,000	?$65,000
2	?$50,000	?$60,000
3	?$50,000	?$40,000
4	?$50,000	?$40,000
5	?$50,000	?$40,000
6	?$50,000	?$40,000