The Sanders Electric Company is evaluating two projects for possible inclusion in the firms capital budget. Project

Question:

The Sanders Electric Company is evaluating two projects for possible inclusion in the firm€™s capital budget. Project M will require a $37,000 investment while project O€™s investment will be $46,000. After-tax cash inflows are estimated as follows for the two projects:

a. Determine the payback period for each project.
b. Calculate the net present value and profitability index for each project based on a 10
c. Determine the internal rate of return and modified internal rate of return for Projects M and O.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...