Question: After the problem has been set up, the calculator should be used to compute NPV and IRR. Show calculator inputs. Chunky Monkey Ice Cream has
After the problem has been set up, the calculator should be used to compute NPV and IRR. Show calculator inputs.
Chunky Monkey Ice Cream has a 12% cost of capital, and has generated the following information on two mutually exclusive projects. Project A will require an investment of $100,000 while the initial outlay for Project B is 2 times greater:
| Year | Project A | Project B |
|
|
|
|
| 1 | 30,000 | 75,000 |
| 2 | 30,000 | 75,000 |
| 3 | 30,000 | 75,000 |
| 4 | 30,000 | 75,000 |
| 5 | 50,000 | 100,000 |
- Compute the payback of both projects. 5 points
- Compute the NPV of both projects 10 points
- Compute the IRR of both projects. 10 points
- Which project should Chunky Monkey adopt? Why? 5 points
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