Question: If Company A was considering two separate projects, each with an initial required investment of $ 350,000 and with anticipated returns as follows, Project 1

If Company A was considering two separate projects, each with an initial required investment of $ 350,000 and with anticipated returns as follows,

Project 1

YEAR 1 - 130,000 YEAR 2 - 120,000 YEAR 3 -100,000 YEAR 4 -90,000

Project 2

YEAR 1 - 110,000 YEAR 2 - 110,000 YEAR 3- 110,000 YEAR 4- 110,000

Show your work.

(a) Analyze the projects in terms of the payback period as well as their NPV.

b) In addition, what the recommendations would be if the projects are independent or if they are mutually exclusive.

(c) The recommendations if Company A has unlimited funding or if it is exercising capital rationing. Be specific and detailed.

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a To analyze the projects in terms of payback period we need to calculate how long it takes for each project to recoup its initial investment For Project 1 Year 1 130000 Year 2 120000 Year 3 100000 Ye... View full answer

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