Description

Consider the two following projects. Use the above information to fill in the cells with the X marks. Also, imagine you are the chair of the selection committee. Based on the information in the tables, make a decision as to whether you will approve Project A or Project B. Explain why you made that decision.

Project A

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5		Total
Net Economic Benefit	0	65000	65000	65000	65000	65000
Discount Rate (12%)	1.000	.8929	.7971	.7118	.6355	.5674
PV of Benefits	0	58039	51812	X	41308	36881
NPV of all Benefits	0	58039	109850	X	197425	X	X
One-Time Costs	(50000)
Recurring Costs	0	(20000)	(20000)	(20000)	(20000)	(20000)
Discount Rate (12%)	1.000	.8929	.7971	.7118	.6355	.5674
PV of Recurring Costs	0	(17858)	X	(14236)	(12710)	(11348)
NPV of all Costs	(50000)	(67858)	X	(98036)	(110746)	X	X
Overall NPV							X
Overall ROI							X
Break-even Analysis
Yearly NPV Cash Flow	(50000)	40181	35870	32031	28598	25533
Overall NPV cash Flow	(50000)	(9820)	26050	58081	86679	112212
Break-even occurs at	X years
Break-even Fraction	X

What is the PV of benefits for year 3? __________________

What is the NPV of benefits for year 3? _________________

What is the PV of costs for year 2? _____________________

What is the NPV of cost for year 2? ____________________

What is the NPV of benefits for year 5? _________________

What is the NPV of Costs in Year 5? ___________________

What is the TOTAL NPV of Benefits? __________________

What is the TOTAL NPV of Costs? ____________________

What is the OVERALL NPV? _________________________

What is the ROI? ____________________________________

When does the project break-even? _____________________

What is the break-even fraction? ________________________