Evaluate Project A and Project B using EXCEL

Estimated expenditures and cash flows for two projects are shown below.

Year Project A Project B

0 (350,000) (3,500,000)

1 150,000 150,000

2 150,000 150,000

3 100,000 750,000

4 75,000 1,500,000

5 75,000 2,000,000

1. Calculate NPV and Profitability Index for Projects A and B at the following costs of capital: 5%, 10%.

2. Calculate IRR for Projects A and B

3. Calculate payback for Projects A and B

4. Using the results for 1-3 put together a clear summary table of the results.

5. In 1-2 sentences, describe-define: (a) NPV; (b) profitability index; (c) payback; and (d) IRR.

6. The projects are mutually exclusive, describe your recommendation and rationale.

7. The projects are independent, describe your recommendation and rationale.

8. If the health care organizations cost of capital is 5%, would this change your recommendation in question 7? Why or why not?