Question: Smart Bumpkins wants to increase its production by adding new equipment. They can choose one of two production line upgrades and must select the better

Smart Bumpkins wants to increase its production by adding new equipment. They can choose one of two production line upgrades and must select the better alternative. They will be using the RADR to account for the risk of the project. The cost of the upgrade is $190,000 and expected cash flows from the new upgrade are expected to be as follows over the next 6 years.

Plan A. Plan B

45,000 35,000

75,000 140,000

110,000 120,000

110,000 110,000

110,000

What would be the NPV of each project and which is the best acceptable project.

What is the ANPV of each project and which is the best acceptable?

What is the IRR of each project and which is best acceptable?

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