Calculate payback period and net present value

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Reference no: EM13286899

Two new production scheduling information systems for Ferro Corporation could be developed at a cost of $105,000 and $135,000 respectively. Interest rate is 15%. The estimated net operating costs and estimated net benefits over five years of operation would be:

Project A

Estimated Net Estimated Net

Year Operating Costs Benefits

0 $ 105,000 0

1 $ 3,500 $26,000

2 $ 4,700 $34,000

3 $ 5,500 $41,000

4 $ 6,300 $55,000

5 $ 7,000 $66,000

Project B

Estimated Net Estimated Net

Year Operating Costs Benefits

0 $ 135,000 $12,500

1 $ 3,800 $21,500

2 $ 4,900 $32,300

3 $ 5,800 $35,300

4 $ 6,700 $44,100

5 $ 7,800 $61,000

Calculate payback period (PBP), net present value (NPV), and internal rate of return (IRR).

Which project do you recommend for development? Support your recommendation.

ANYONE KNOW HOW TO SOLVE THE ANSWERS TO THE PBP,NPV AND IRR?

Reference no: EM13286899

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