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Determine the highest cost of capital

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NPV?, with rankings Botany? Bay, Inc., a maker of casual? clothing, is considering four projects shown in the following? table,

Project A   Project B   Project C Project D   

?$50,900 ? $100,000 ?$79,300 ?$181,000

(Year) Initial investment ?(CF 0CF0?) (t?) Cash inflows

1 ? $20,100 $36,900 ?$19,400 ?$101,000

2 $20,100 ?$51,100 ?$40,800 $79,400

3 ?$20,100 ?$50,700 ?$59,800 $60,700

Because of past financial? difficulties, the company has a high cost of capital at 14.5%.

a. Calculate the NPV of each? project, using a cost of capital of 14.5%.

b. Rank acceptable projects by NPV.

c. Calculate the IRR of each project and use it to determine the highest cost of capital at which all of the projects would be acceptable.

Reference no: EM131893641

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