1 Problem 3. 2 3 4 5 6 7 8 Dravid, Inc., is currently evaluating three...

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1 Problem 3. 2 3 4 5 6 7 8 Dravid, Inc., is currently evaluating three projects. The cost of funds or the hurdle rate for the company is 12.5%. All three projects cost the same at $500,000. Expected cash flow streams are shown in the following table. Company has limited resources and can go ahead with only one of the three projects. Which project would you recommend?Use NPV to compare these projects. 9 Discount rate: 0 1 Project 1 12.50% (500,000) $ 1 2 Year 0 3 Cash flow $ 4 NPV 5 5 Project 2 B NPV Year Cash flow 0 $ Project 3 Year Cash flow $ NPV (500,000) $ 1 0 (500,000) $ Introduction Example Drabl F G 2 3 4 50,000 $ 125,000 $ 150,000 $ 350,000 $ 2 1 225,000 $ 2 3 4 $ 400,000 $ 500,000 3 4 225,000 $ 115,000 $ 75,000 1 Problem 3. 2 3 4 5 6 7 8 Dravid, Inc., is currently evaluating three projects. The cost of funds or the hurdle rate for the company is 12.5%. All three projects cost the same at $500,000. Expected cash flow streams are shown in the following table. Company has limited resources and can go ahead with only one of the three projects. Which project would you recommend?Use NPV to compare these projects. 9 Discount rate: 0 1 Project 1 12.50% (500,000) $ 1 2 Year 0 3 Cash flow $ 4 NPV 5 5 Project 2 B NPV Year Cash flow 0 $ Project 3 Year Cash flow $ NPV (500,000) $ 1 0 (500,000) $ Introduction Example Drabl F G 2 3 4 50,000 $ 125,000 $ 150,000 $ 350,000 $ 2 1 225,000 $ 2 3 4 $ 400,000 $ 500,000 3 4 225,000 $ 115,000 $ 75,000