Question: Consider two potential projects: Year Project A1 Project B1 0 -$120,000 -$120,000 1 $40,000 $0 2 $40,000 $0 3 $40,000 $0 4 $40,000 $0 5
Consider two potential projects:
Year | Project A1 | Project B1 |
0 | -$120,000 | -$120,000 |
1 | $40,000 | $0 |
2 | $40,000 | $0 |
3 | $40,000 | $0 |
4 | $40,000 | $0 |
5 | $40,000 | $180,000 |
Requirements:
- Calculate the NPV for both projects at a 7% discount rate.
- Compute the IRR for both projects.
- Determine the Payback Period and the Discounted Payback Period for each project.
- Explain which project you would recommend and why.
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