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What is the npv for each of these projects

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Question - Redco ne Chem analyzing two projects in this year's capital budget; polyethylene & metha nol. The cash outlay for the polyethylene $17,100, and that for the methanol is $22,430. The firm's cost of capital is 14 percent. After-tax cash flows, including depreciation, are as follows:

Year

Polyethylene

Methanol

1

5,100

7,500

2

5,100

7,500

3

5,300

6,200

4

5,600

7,200

5

7,000

9,350

Required -

1. What is the payback period for each of the projects?

2. What is the NPV for each of these projects? Which project will you choose if you apply the NPV decision rule?

3. What is your expectation about the IRR for the two projects?

4. If the two projects are independent and the company has unlimited fund, is it possible to choose the two projects?

5. Which project of the two projects yields high profitability index?

Reference no: EM133037245

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