Reference no: EM132873144

You are considering the following two projects for investment:

                  Project A               Project B

Year 0       ($10000)                ($5000)

Year 1      $3000                    $3000

Year 2           $7000             $4000

Year 3       $9000                    $5000

You must conduct an analysis using your knowledge of capital budgeting (NPV, IRR etc.) and time value of money to decide which of the options is better. All analysis must be done in Excel. (This will require all calculations to be done using cell references and excel functions).

Your analysis will require you to:

Question A. Calculate the following values for the investment proposals:

i. The payback period assuming end-of-the-year cash flows. 

ii. The discounted payback period assuming a required rate of return of 10% and end-of-the-year cash flows. 

iii. The NPV of each project. 

iv. The PI of each project. 

v. The IRR of each project.

vi. The MIRR of each project assuming a reinvestment rate of 10%. 

Question B. Explain which project should be undertaken if the projects are independent.

Question C. Explain which project should be undertaken if the projects are independent. Explain which project should be undertaken if the projects are mutually exclusive.