Solving this question in excel using project management skills.

You are considering two possible projects (Project A and Project B) that could start immediately. The program manager has indicated that you can only select one of these projects given resource constrains, and asked you to evaluate each project and recommend which project you think the company should adopt. You have made the following cash flow forecasts for each project.

Project A would require an initial investment of $6.2M (USD) to begin the project and a second investment of $1.8M one year from the start of the project. The project is expected to earn $2.5M, $6.2M, and $10.6M in years 2, 3, and 4, respectively.

Project B would require an initial investment of $14M and an additional investment of $8.2M at the end of the first year but is expected to return a net positive cash flow of $1.2M, $4.6M, $8.35M, and $34M at the end of years 2 5, respectively.

You estimate that an appropriate annual discount rate is 12 percent based on your companys future projected performance. Furthermore, the CFO has indicated that there is an expected inflation rate of 2 percent (based on recent information from the WSJ) that should be factored into your calculations; he feels that this rate will be fairly constant over the foreseeable future.

Your boss indicated that you should consider the inflation rate adjusted NPV, the IRR, and the Profitability Index when comparing these two projects. Using discrete discounting and these metrics, which project would you recommend? What other factors (other than these metrics) might be important when comparing these projects? How would your companys risk tolerance impact the possible decision?

1) You are considering two possible projects (Project A and Project B) that could start immediately. The program manager has indicated that you can only select one of these projects given resource constrains, and asked you to evaluate each project and recommend which project you think the company should adopt. You have made the following cash flow forecasts for each project. Project A would require an initial investment of $6.2M (USD) to begin the project and a second investment of $1.8M one year from the start of the project. The project is expected to earn $2.5M,$6.2M, and $10.6M in years 2,3 , and 4 , respectively. Project B would require an initial investment of $14M and an additional investment of $8.2M at the end of the first year but is expected to return a net positive cash flow of $1.2M,$4.6M,$8.35M, and $34M at the end of years 25, respectively. You estimate that an appropriate annual discount rate is 12 percent based on your company's future projected performance. Furthermore, the CFO has indicated that there is an expected inflation rate of 2 percent (based on recent information from the WSJ) that should be factored into your calculations; he feels that this rate will be fairly constant over the foreseeable future. Your boss indicated that you should consider the inflation rate adjusted NPV, the IRR, and the Profitability Index when comparing these two projects. Using discrete discounting and these metrics, which project would you recommend? What other factors (other than these metrics) might be important when comparing these projects? How would your company's risk tolerance impact the possible decision