Novell, Inc., has the following mutually exclusive projects.

Year      Project A         Project B

0           –$26,000        –$29,000

1           15,000              16,000

2           11,500             10,000

3             3,500            11,500

A- Calculate the payback period for each project

B-What is the NPV for each project if the appropriate discount rate is 13 percent?

Answer rating: 100% (QA)

To calculate the payback period for each project well accumulate the cash flows until the investment is recovered Lets start by calculating the payback period for each project A Payback period for Project A 1 year Year 1 B Payback period for Project B 1 year Year 1 Next lets calculate the Net Present Value NPV for each project using a discount rate of 13 percent The formula for NPV is NPV sumt0n CFt1rt where CFt is the cash flow ... View the full answer