Your first assignment in your new position as an assistant financial analyst at Caledonia Products is...

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Finance

Your first assignment in your new position as an assistantfinancial analyst at Caledonia Products is to evaluate two new?capital-budgeting proposals. Because this is your first?assignment, you have been asked not only to provide arecommendation but also to respond to a number of questions aimedat assessing your understanding of the? capital-budgeting process.This is a standard procedure for all new financial analysts at?Caledonia, and it will serve to determine whether you are moveddirectly into the? capital-budgeting analysis department or areprovided with remedial training. The memorandum you receivedoutlining your assignment? follows:
?To: New Financial Analysts
?From: Mr. V.? Morrison, CEO, Caledonia Products
?Re: Capital-Budgeting Analysis
Provide an evaluation of two proposed? projects, both with55?-year expected lives and identical initial outlays of $150,000.Both of these projects involve additions to?Caledonia's highlysuccessful Avalon product? line, and as a? result, the requiredrate of return on both projects has been established at 14 percent.The expected free cash flows from each project are shown in thepopup? window:
Initial outlay
Project A:
??150,000
Project B:
??150,000
Inflow year 1
30,000
?40,000
Inflow year 2
?20,000
40,000
Inflow year 3
?50,000
?40,000
Inflow year 4
?40,000
?40,000
Inflow year 5
70,000
?40,000
1.What is the payback period on project? A?
2.What is the payback period on project? B?
3.What is the NPV of project? A?
4.What is the NPV of project? B?
5.What is the PI for project? A?
6.What is the PI for project? B?
7.What is the IRR for project? A?
8.What is the IRR for project? B?

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Your first assignment in your new position as an assistantfinancial analyst at Caledonia Products is to evaluate two new?capital-budgeting proposals. Because this is your first?assignment, you have been asked not only to provide arecommendation but also to respond to a number of questions aimedat assessing your understanding of the? capital-budgeting process.This is a standard procedure for all new financial analysts at?Caledonia, and it will serve to determine whether you are moveddirectly into the? capital-budgeting analysis department or areprovided with remedial training. The memorandum you receivedoutlining your assignment? follows:?To: New Financial Analysts?From: Mr. V.? Morrison, CEO, Caledonia Products?Re: Capital-Budgeting AnalysisProvide an evaluation of two proposed? projects, both with55?-year expected lives and identical initial outlays of $150,000.Both of these projects involve additions to?Caledonia's highlysuccessful Avalon product? line, and as a? result, the requiredrate of return on both projects has been established at 14 percent.The expected free cash flows from each project are shown in thepopup? window:Initial outlayProject A:??150,000Project B:??150,000Inflow year 130,000?40,000Inflow year 2?20,00040,000Inflow year 3?50,000?40,000Inflow year 4?40,000?40,000Inflow year 570,000?40,0001.What is the payback period on project? A?2.What is the payback period on project? B?3.What is the NPV of project? A?4.What is the NPV of project? B?5.What is the PI for project? A?6.What is the PI for project? B?7.What is the IRR for project? A?8.What is the IRR for project? B?

Initial outlay	Project A: ??150,000	Project B: ??150,000
Inflow year 1	30,000	?40,000
Inflow year 2	?20,000	40,000
Inflow year 3	?50,000	?40,000
Inflow year 4	?40,000	?40,000
Inflow year 5	70,000	?40,000