Case 2: Evaluate a project with a $25,000 startup cost and annual ongoing costs of $2,500. Cash flows in the first year are estimated to be $1,500 in the first year, $5,500 in the second year, $6,700 in the third year, $9,300 in the fourth year, and $11,500 in the fifth and final year. There is also equipment that is estimated to have a $20,000 salvage value. Assume that the final cash flows and the equipment salvage happen in the same period.

1. Use the NPV function to help calculate the Net Present Value of the project in Case 2 (NPV plus the startup cost[a negative number]) Use 12% as your required return/cost of capital for Case 2

2. Calculate the present value of each cash flow and add the values together. Did the answer match your answer in Q6?

3. Use the XIRR function to calculate the Internal Rate of Return for the project in Case 2. Use today's date as the start date T0, and the same date a year later for T1 and so on.

4. What required rate/cost of capital would make you indifferent to the project in Case 1 and Case 2? (What rate makes the Net Present Value equal?

5. What is the Discounted Payback Period for Case 2?

6: Using the base required return/cost of capital for cases 1 and 2, which project do you prefer and why?