Question 6

Scenario: Evaluate the following cash flows for Projects G and H:

• Project G:
  • Year 0: -$100,000
  • Year 1: $30,000
  • Year 2: $25,000
  • Year 3: $35,000
  • Year 4: $40,000
  • Year 5: $45,000
  • Year 6: $50,000
• Project H:
  • Year 0: -$120,000
  • Year 1: $40,000
  • Year 2: $35,000
  • Year 3: $45,000
  • Year 4: $50,000
  • Year 5: $55,000
  • Year 6: $60,000

Requirements: a. Compute the NPV for each project with a required rate of return of 11 percent. b. Calculate the IRR for each project. c. Find the traditional payback period for each project. d. Recommend which project(s) should be selected if they are independent. e. Recommend which project should be selected if they are mutually exclusive.