****PLEASE SHOW WORK iN EXCEL****

Suppose you are a capital budgeting analyst for a company considering investments in six projects listed in Exhibit 1. The company has determined that they can undertake each of these projects and have forecasted the project cash flows from each project in Exhibit 1.

Since you are studying for your MBA at the Robert H Smith School, the chief financial officer of your company has asked you to rank the projects and recommend the three best that the company should accept. You will rank the projects based on quantitative decisions alone. No other project characteristics are relevant in the selection, except that management has determined that projects 3 and 4 are mutually exclusive. All other projects are independent.

All the projects require the same initial investment, $5 million. Moreover, all are believed to be of the same risk class. Assume that 12% is an appropriate discount rate (some officers of the company have suggested that the discount rate should be higher).

Calculate: NPV, IRR, MIRR, profitability index. Post your completed assignment to Elms. Calculate the crossover point for Projects #3 and #4. This is the point at which the NPVs of the two projects are the same. Looking at this discount rate and at the discount rate given in the case, how might this influence your decision about which project to accept?

Exhibit 1

Project Cash Flows (dollars in thousands)

Project:			1	2	3	4	5	6
Initial cost:			-5000	-5000	-5000	-5000	-5000	-5000
Year
1			0	700	2500	-550	670	625
2			0	900	1700	-50	670	625
3			0	915	900	60	670	625
4			0	920	700	450	670	625
5			0	925	500	800	670	625
6			0	930	300	1100	670	625
7			0	940	200	1350	670	625
8			0	950	150	1500	670	625
9			0	960	100	1625	670	625
10			0	970	60	1725	670	625
11			0	980	30	1810	670	625
12			0	990	20	1885	670	625
13			0	1000	10	1935	670	625
14			0	1100	5	1975	670	625
15			22000	-5000	5	2000	670	5625