Question 1: Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint? Why?

Question 2: A five-year project has a projected net cash flow of $15,000, $25,000, $30,000, $20,000, and $15,000 in the next five years. It will cost $50,000 to implement the project. If the required rate of return is 20 percent, conduct a discounted cash flow calculation to determine the NPV.

Question 3: The Custom Bike Company has set up a weighted scoring matrix for evaluation of potential projects. Below are three projects under consideration.

a. Using the scoring matrix below, which project would you rate highest? Lowest?

b. If the weight for Strong Sponsor is changed from 2.0 to 5.0, will the project selection change? What are the three highest weighted project scores with this new weight?

c. Why is it important that the weights mirror critical strategic factors?

a N Strong sponsor Supports business strategy Urgency 10% of sales a o o o from new products Competition N o Fill market gap Weighted total