Question: The Zelo Corp. is considering two projects. The cash flows associated with those projects are as follows: Year Project A Project B 0 -$50,000 -$50,000

The Zelo Corp. is considering two projects. The cash flows associated with those projects are as follows:

Year Project A Project B
0 -$50,000 -$50,000
1 16,000 0
2 16,000 0
3 16,000 0
4 16,000 0
5 16,000 $100,000

What is each projects payback period? Which project should be chosen if they are independent; and if they are mutually exclusive?

b. What is each projects net present value? Which project should be chosen if they are independent; if they are mutually exclusive?

c. What is each projects internal rate of return? Which project should be chosen if they are independent; and if they are mutually exclusive?

d. Draw the NPV profile for these projects. Explain this graph and state what has caused the ranking conflict. How do you resolve the conflict?

e. What is modified IRR and its use?

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