Plainview Packing Company $($PPC$)$ is evaluating the following two projects. Each project has an upfront cost of $$100,000,$ and each project will generate annual returns over a six$-$year period. At the end of six years all assets associated with each project will have no value and there will be no end$-$of$-$project disposal costs. Ignore the effect of taxes in your analysis.

Project Happy

Up$-$front cost $($t$=0)$ Year $1$ return $($t$=1)$ Year $2$ return $($t$=2)$ Year $3$ return $($t$=3)$ Year $4$ return $($t$=4)$ Year $5$ return $($t$=5)$ Year $6$ return $($t$=6)$

$(100,000)40,00040,00040,00010,00010,00010,000$

Project Bovina

Up$-$front cost $($t$=0)$ Year $1$ return $($t$=1)$ Year $2$ return $($t$=2)$ Year $3$ return $($t$=3)$ Year $4$ return $($t$=4)$ Year $5$ return $($t$=5)$ Year $6$ return $($t$=6)$

$(100,000)10,00010,00010,00050,00050,00050,000$

Based on the above, provide the following:

Weighted Average Cost of Capital NPV Project Happy NPV Project Bovina

$5\%6,538\mathrm{.}22$

$10\%$

$15\%$

NPV Project Happy

Based this information, what can you conclude about the effect of variations in interest rates on the evaluation and selection of projects?

Scenario $2$:

PPC is considering Project Claude with an up$-$front cost of $$93,715$ and benefits of $$18,000$ per year for the next seven years.

Using a weighted average cost of capital of $6\%$ what is the net present value $($NPV$)$ of this project?

What is the internal rate of return $($IRR$)$ of this project?