YEARPROJECT APROJECT B
0$100,000$100,000
132,0000
232,0000
332,0000
432,0000
532,000$200,000
The require rate of reproduction on these projects is 11 percent.
a.What is each projects vengeance period?
b.What is each projects net present value?
c.What is each projects internal rate of return?
d.What has caused the ranking conflict?
e.Which project should be accepted? Why?
PROJECT A
PP =100,000/32,000= 3.125
IRR = 18.03
NPV a = 32,000( 1/ (1 + .11)1) 100,000
= 18,268.70
PI = 160,000/ 100,000= 1.6
reckon A
CFo = -100,000
F1 = 5
CF1 = 32,000
= 18,268.70
NET PRESENT VALUE
wander AProject B
capital FlowCash Flow
Initial Outlay-100,000Initial Outlay -100,000
Year 132,000Year 10
Year 232,000Year 2 0
Year 332,000Year 30
Year 432,000Year 40
Year 532,000Year 5200,000
PV$118,268.70 PV$118,690.27
-100,000.00-100,000
NPV=18,268.70NPV=18,690.
27
INTERNAL RATE OF RETURN
socio-economic classproject A socio-economic classProject B
0--1000000-100000
13200010
23200020
33200030
43200040
5320005200000
18.03%14.87%
The conflict is started by the projects containing two different cash flows in different periods of time. The return cash flows of Project A looks to be consistent over the course of five geezerhood after the initial $100,000 investment. They are receiving almost a 1/3 of the original investment back every year and thus can recover more quickly. Project B has an immediate investment of $100,000 with no return until year 5. Although Project B seems to be the better deal, Project A is the beat out value.
Based on the following information that was gathered from payback period, net present value and internal rate of return on project A and project B the opera hat accepted exclusive project that...If you want to get a full essay, order it on our website: Orderessay
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