Compute the NPV, IRR and Payback Period for each project

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Reference no: EM132831910

Question - Empire Manufacturing is considering two mutually exclusive projects with the following cash flows. Empire's cost of capital is 10 percent.

Year	Project A	Project B
0	(485,000)	(485,000)
1	0	155,000
2	0	152,000
3	0	131,000
4	0	110,000
5	0	108,000
6	1,000,000	98,500

Required -

a) Compute the NPV, IRR and Payback Period for each project.

Assuming the projects were mutually exclusive:

b) If the payback criterion was four years, which project would be chosen?

c) If the hurdle rate was 13% which project would be chosen based on IRR?

d) Which project would be chosen if NPV was the decision method?

Assuming the projects were independent:

e) If the payback criterion was four years, which project would be chosen?

f) If the hurdle rate was 13% which project would be chosen based on IRR?

g) Which project would be chosen based on NPV?

Reference no: EM132831910

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