Problem regarding additional capital outlay

Reference no: EM13157520

A company has $2 million to invest in another capital project. The budget committee is considering two 6-year projects. Project A cash flows are forecasted at $500,000 a year for all six years. Project B is projected to begin the first year cash flow at $300,000 and it is expected that cash flows will increase each year another $100,000. This would mean that in year six, the cash flow would be $800,000. However, it is also projected for Project B that in years three and four there will be an additional capital outlay of $100,000 for each year. Compute the NPV, IRR, Payback for both projects and select the best project. Show your work.

Reference no: EM13157520

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