Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, each with an initial investment of $150,000.

Question:

Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, each with an initial investment of $150,000. The company€™s board of directors has set a maximum 4-year payback requirement and has set its at 9%. The cash inflows associated with the two projects are shown in the following table.

a. Calculate the payback period for each project.
b. Calculate the NPV of each project at 0%.
c. Calculate the NPV of each project at 9%.
d. Derive the IRR of each project.
e. Rank the projects by each of the techniques used. Make and justify arecommendation.

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... 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,...