Question: Exercise - Chapter 5 - Capital Budgeting Project Analysis As director of capital budgeting, you are reviewing three potential investment projects with the following cost
Exercise - Chapter 5 - Capital Budgeting Project Analysis
As director of capital budgeting, you are reviewing three potential investment projects with the following cost and cash flow projections.
| Cash Flow | Project A | Project B | Project C |
| Investment Cost | ($400,000) | ($375,000) | ($400,000) |
| Year One Cash Flow | $200,000 | $75,000 | $50,000 |
| Year Two Cash Flow | $50,000 | $75,000 | $120,000 |
| Year Three Cash Flow | $75,000 | $85,000 | $140,000 |
| Year Four Cash Flow | $50,000 | $225,000 | $125,000 |
| Year Five Cash Flow | $125,000 | $60,000 | $125,000 |
Calculate the Payback Period for each project.
Question 2
If the discount rate for all three projects is 10.5%, calculate the Net Present Value for each project
Question 3
Calculate the Internal Rate of Return (IRR) for each project
Question 4
Assuming your capital investment budget of $500,000 will only allow selection of one project (thus the projects are now mutually exclusive), which project should you fund
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