You have been authorized to spend up to $403,000 for projects. The three porject

Question

You have been authorized to spend up to $403,000 for projects. The three porjects you are considering have the following characteristics:

Project A: Initail investment of $277,000. Cash flow of $193,000 at 1 year and $173,000 at year 2. This is a plant expansion project, where the required rate of return is 13 percent.

Project B: Initail investment of $387,000. Cash flow of $273,000 at year 1 and $243,000 at year 2. This is a new product development project, where the required rate of return is 17 percent.

Project C: Initial investment of $227,000. Cash flow of $163,000 at year 1 and $193,000 at year 2. This is a market expansion project, where the required rate of return is 12 percent.

Assume the corporate discount rate is 13 percent.

Calculate the following (round answers 2 decimal places)

Payback                  ________ years   ________ years   ________ years

IRR                          ________ %        ________ %         _______ %

PI                             ________            ________             _______

NPV                         ________            ________             _______

Explanation / Answer

Payback 1.49 years years 1.47 1.33 years

IRR 21.2% 22.01% 34.85%

PI 1.1057 1.0616 1.3189

NPV 29280.84 23848.12 72394.13

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