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Can you help by reviewing the question and my answ...




Can you help by reviewing the question and my answer, and correcting/explaining. Please show the calculations for NVP and IRR, the methodology. Q: 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? My answer so far: Year Project I Project II Payback (yrs) 2.0526 2.0714 Discounted 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.,Rachel: Here's another question, I'll pay again and separately for the service. Could you please review this question and take a look at my answer, recalculate, solve and show all the calculations Bob's car lot will sell a used car for $3,000 with no money down. The buyer must agree to weekly payments of $40 for two years, starting one week after the car is bought. What is the EAR of this loan? Answer: PV = 3,000 = C*((1 - 1/((1 + .26/52)^104))/(.26/52)) C = $37.06,Rachel: I do not see that you have added anything to the spreadsheet I provided. I gather that by making no changes you may agree with my answer, but wanted you to do it and show me. I do not see your calculations for the NVP and the IRR, which is what I was looking for.


Paper#3950 | Written in 18-Jul-2015

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