Question 5

Scenario: Review the cash flows for Project E and Project F:

• Project E:
  • Initial Investment: -$85,000
  • Year 1: $22,000
  • Year 2: $18,000
  • Year 3: $26,000
  • Year 4: $30,000
  • Year 5: $34,000
  • Year 6: $38,000
• Project F:
  • Initial Investment: -$95,000
  • Year 1: $28,000
  • Year 2: $32,000
  • Year 3: $36,000
  • Year 4: $40,000
  • Year 5: $44,000
  • Year 6: $48,000

Requirements: a. Calculate the NPV for each project using a discount rate of 7 percent. b. Determine the IRR for each project. c. Compute the traditional payback period for each project. d. Advise which project(s) should be selected if they are independent. e. Advise which project should be selected if they are mutually exclusive.