Unit $9$ Individual Assignment

An organization needs to prioritize $5$ projects given below based on NPV and sensitivity analysis.

Students will perform a cash flow analysis based on the given discount rate for each project within a

sensitivity range of $+/-2\%$ and provide their recommendation on the prioritization of the $5$ projects.

Learners are expected to show all net present value calculations and provide their rationale for their

chosen prioritization order.

Project $1$: Solar Panel Installation

The Solar Panel Installation project requires an initial investment of $$150,000.$ The expected annual cash

inflows are $$30,000$ in the first year, $$40,000$ in the second year, $$50,000$ in the third year, $$60,000$ in the

fourth year, and $$70,000$ in the fifth year. However, maintenance costs are $$10,000$ at the end of the

third year. Additionally, the panels have a salvage value of $$20,000$ at the end of the fifth year. The

discount rate for this project is $8\%.$

Project $2$: New Software Development

The New Software Development project requires an initial investment of $$200,000.$ The project will

generate cash inflows of $$50,000$ in the first year, $$70,000$ in the second year, $$90,000$ in the third year,

$$110,000$ in the fourth year, and $$130,000$ in the fifth year. There are annual maintenance costs of

$$5,000$ starting from the second year onwards. The software has no salvage value. The discount rate for

this project is $10\%.$

Project $3$: Manufacturing Plant Upgrade

The Manufacturing Plant Upgrade project requires an initial investment of $$500,000.$ The project will

generate cash inflows of $$100,000$ in the first year, $$120,000$ in the second year, $$140,000$ in the third

year, $$160,000$ in the fourth year, and $$180,000$ in the fifth year. There are additional outflows for

equipment upgrades of $$50,000$ at the end of the second year and $$50,000$ at the end of the fourth year.

The upgraded plant has a salvage value of $$50,000$ at the end of the fifth year. The discount rate for this

project is $12\%.$

Project $4$: Retail Store Expansion

The Retail Store Expansion project requires an initial investment of $$300,000.$ The expected annual cash

inflows are $$60,000$ in the first year, $$70,000$ in the second year, $$80,000$ in the third year, $$90,000$ in the

fourth year, and $$100,000$ in the fifth year. There are additional costs for store refurbishments of $$30,000$

at the end of the second year and $$30,000$ at the end of the fourth year. The expanded store has a

salvage value of $$20,000$ at the end of the fifth year. The discount rate for this project is $9\%.$

Project $5$: Online Marketing Campaign

The Online Marketing Campaign project requires an initial investment of $$100,000.$ The project will

generate cash inflows of $$20,000$ in the first year, $$30,000$ in the second year, $$40,000$ in the third year,

$$50,000$ in the fourth year, and $$60,000$ in the fifth year. There are additional marketing costs of $$10,000$

at the end of the third year and $$10,000$ at the end of the fourth year. The campaign has no salvage

value. The discount rate for this project is $15\%$