Required return for Project A: 11.58

Project B: 8.84

Project C: 10.03

Project D: 13.9

4-7. For each project, calculate the NPV, IRR, profitability index (PI) and the payback period. For each capital budgeting decision tool, indicate if the project should be accepted or rejected, assuming that each project is independent of the others. Important Note: The venture capital folks have a hard and fast rule on payback period, all projects must be completed within 6 years or less. Expected cash flows for the four potential projects that DHC is considering as shown below: Year Project A -$4,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $800,000 Project | $6,000,000 $1,500,000 $1,500,000 $2,500,000 $2,500,000 Project B -$8,000,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 Project D $3,000,000 $300,000 $500,000 $500,000 $750,000 $750,000 $750,000 $750,000 $750,000 $750,000 $750,000 $0 $800,000 $300,000 10 I have provided a suggested template for your final answers. Below the grid (and/or next page) is where you should put all your required backup calculations. If you are working this in Excel, feel free to submit your Excel sheet, where the equations in the cells will provide the required backup. Be sure to clearly indicate the required rate of return (from part 3) you are using for each project. Project D Points Year Project A Project Bl Project | Req. Return (use 2 decimals xx.xx%) 4a NPV (to nearest $1) 46 NPV accept/reject 5a IRR (xx.xx% 5b IRR accept/reject PI (show 2 decimals) 66 PI accept reject Payback Period 7a (x.x years) Payback 7b accept/reject Please show your supporting equations and/or the calculator inputs below. 2 1 4-7. For each project, calculate the NPV, IRR, profitability index (PI) and the payback period. For each capital budgeting decision tool, indicate if the project should be accepted or rejected, assuming that each project is independent of the others. Important Note: The venture capital folks have a hard and fast rule on payback period, all projects must be completed within 6 years or less. Expected cash flows for the four potential projects that DHC is considering as shown below: Year Project A -$4,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $800,000 Project | $6,000,000 $1,500,000 $1,500,000 $2,500,000 $2,500,000 Project B -$8,000,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 Project D $3,000,000 $300,000 $500,000 $500,000 $750,000 $750,000 $750,000 $750,000 $750,000 $750,000 $750,000 $0 $800,000 $300,000 10 I have provided a suggested template for your final answers. Below the grid (and/or next page) is where you should put all your required backup calculations. If you are working this in Excel, feel free to submit your Excel sheet, where the equations in the cells will provide the required backup. Be sure to clearly indicate the required rate of return (from part 3) you are using for each project. Project D Points Year Project A Project Bl Project | Req. Return (use 2 decimals xx.xx%) 4a NPV (to nearest $1) 46 NPV accept/reject 5a IRR (xx.xx% 5b IRR accept/reject PI (show 2 decimals) 66 PI accept reject Payback Period 7a (x.x years) Payback 7b accept/reject Please show your supporting equations and/or the calculator inputs below. 2 1