Could you please check my work so far and help me to calculate (show calculations) for the NVP and IRR? I uploaded a spreadsheet. BobCo. is trying to decide between the following two mutually exclusive projects: Cash Flows Year Project I Project II 0 -$18,000 -$12,000 1 $8,500 $6,500 2 $9,000 $6,000 3 $9,500 $7,000 The only requirement the company has is that any project that is accepted must produce a minimum rate of return of 11%. Calculate payback period, discounted payback period, IRR and NPV, as well as any other measures which would be helpful. Fill in the following table with your results: Year Project I Project II Payback (yrs.) Discounted Payback (yrs.) IRR NPV What should the company do and why? Year Project I Project II Payback (yrs) 2.0526 2.0714 Disc Payback (yrs) 2.4373 2.249 IRR 22.90% 28.40% NPV $3,909.00 $3,844.00 Both projects payback within the three years identified and both exceed the minimum desired rate of return requirement of 11%. Were they not mutually exclusive, both would be feasible. However, they are mutually exclusive projects, and while it is tempting to select the project with the higher internal rate of return, it is more appropriate that we choose the project with the higher net present value and earlier payback, Project I.
Paper#2726 | Written in 18-Jul-2015Price : $25