Following are the net cash flow estimates for two projects for you to analyze:

Expected Net Cash Flows

Year Project F Project N

0 $(100,000) $(100,000)

1 10,000 70,000

2 60,000 50,000

3 80,000 20,00

The companys required rate of return is 10 percent. You must now determine whether one or both the projects should be accepted. Following are the requirements you must complete for the assignment:

1. For each project, compute the (1) traditional payback period (PB), (2) discounted payback period (DPB), (3) net present value (NPV), and (4) internal rate of return (IRR). These computations can be completed using either a financial calculator or a spreadsheet. If you use a financial calculator, you must show all your work to receive full credit. If you use a spreadsheet, you should use the functions that are built into the spreadsheet, and you must submit a spreadsheet that shows the computations/functions in the cells where the results appear.
2. Which project(s) should be accepted if they are independent? Mutually exclusive? Explain why you selected the project(s) in each case.
3. Would the NPVs change if the required rate of return changed? Explain.
4. Would the projects IRRs change if the required rate of return changed? Explain.
5. Using a spreadsheet, such as Excel, construct the NPV profiles for Project F and Project N. At what discount rate do the profiles cross? (See footnote 6 in Chapter 9 for guidance in computing the crossover rate.)

All your explanations must be typed.