5. Quack Ltd. Is considering 2 alternative projects to invest in. Each alternative involves an initial...

    

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5. Quack Ltd. Is considering 2 alternative projects to invest in. Each alternative involves an initial outlay of $600,000 and a 10% cost of capital. Management requires that all project investments should be recovered in 3 years. Their cash flows follow: Year A Ltd B Ltd 1 200,000 190,000 2 180,000 170,000 3 150,000 0 45 150,000 130,000 100,000 120,000 i. ii. iii. Calculate each project's Payback Period. Based on the payback periods, which project(s) should they accept if the project(s) are independent. Which project(s) should they accept if the projects are mutually exclusive? Calculate each project's Net Present Value (NPV). Based on the NPVs, which project(s) should they accept if the project(s) are independent. Which project(s) should they accept if the projects are mutually exclusive? Calculate the discounted payback period for the projects with positive NPVs. 5. Quack Ltd. Is considering 2 alternative projects to invest in. Each alternative involves an initial outlay of $600,000 and a 10% cost of capital. Management requires that all project investments should be recovered in 3 years. Their cash flows follow: Year A Ltd B Ltd 1 200,000 190,000 2 180,000 170,000 3 150,000 0 45 150,000 130,000 100,000 120,000 i. ii. iii. Calculate each project's Payback Period. Based on the payback periods, which project(s) should they accept if the project(s) are independent. Which project(s) should they accept if the projects are mutually exclusive? Calculate each project's Net Present Value (NPV). Based on the NPVs, which project(s) should they accept if the project(s) are independent. Which project(s) should they accept if the projects are mutually exclusive? Calculate the discounted payback period for the projects with positive NPVs.