a.

Project A Project B
Payback perio 4 4
b. The Company should invest in Porject B.
c. The Company should invest in Project B due to time value of money because payback period for bot
se payback period for both options are the same. Initial investment is recovered sooner in case of B project, therefore priority o
project, therefore priority over project A should be given to project B.
a. b
Cost of capital 9% 9%
Initial investme 1000000 2500000
Cash inflows 150000 320000
Period, years 15 15

To be accepted To be accepted
NPV $209,103.26 $79,420.30
Initial investme-1,000,000.00 -2500000
Cash inflow 150,000.00 320000
150,000.00 320000
150,000.00 320000
150,000.00 320000
150,000.00 320000
150,000.00 320000
150,000.00 320000
150,000.00 320000
150,000.00 320000
150,000.00 320000
150,000.00 320000
150,000.00 320000
150,000.00 320000
150,000.00 320000
150,000.00 320000
c.
9%
3000000
365000
15

To be rejected
-$57,848.72
-3000000
365000
365000
365000
365000
365000
365000
365000
365000
365000
365000
365000
365000
365000
365000
365000
a. NPV $2,674.63 b. NPV $838.20
Cost of capital 10% Cost of capital 12%
Initial investm -24000 Initial investm -24000
Cash inflows 5000 Cash inflows 5000
5000 5000
5000 5000
5000 5000
5000 5000
5000 5000
5000 5000
5000 5000

To be accepted To be accepted

Investment in new fragrance-mixing machine worth investing when cost of capital is either 10% or 12
 c. NPV -$805.68
Cost of capital 14%
Initial investm -24000
Cash inflows 5000
5000
5000
5000
5000
5000
5000
5000

To be rejected

capital is either 10% or 12%, because NPV is positive, hence such investment will increase company's value. However, when c
s value. However, when cost of capital is 14% NPV is negative and this decision will decrease firms value. Morover, due to high
alue. Morover, due to higher number of NPV 15% cost of capital is preferrable over 12%.
Cost of capital 14%

Project A Project B Project C Project D Project E

Initial investm -26000 -500000 -170000 -950000 -80000
Years Cash inflows
1 4000 100000 20000 230000 0
2 4000 120000 19000 230000 0
3 4000 140000 18000 230000 0
4 4000 160000 17000 230000 20000
5 4000 180000 16000 230000 30000
6 4000 200000 15000 230000 0
7 4000 14000 230000 50000
8 4000 13000 230000 60000
9 4000 12000 70000
10 4000 11000

NPV -$5,135.54 $53,887.93 -$83,668.24 $116,938.70 $9,963.63

Decision Reject Accept Reject Accept Accept

 Cost of capital 15%

Press A Press B Press C

Initial investm -85000 -60000 -130000
Years Cash inflow
1 18000 12000 50000
2 18000 14000 30000
3 18000 16000 20000
4 18000 18000 20000
5 18000 20000 20000
6 18000 25000 30000
7 18000 0 40000
8 18000 0 50000

a. NPV -$4,228.21 $2,584.34 $15,043.89

b. Acceptability Reject Accept Accept
c. Ranking 2nd 1st
d. Profitability in $0.95 $1.04 $1.12
e. Ranking, PI 2nd 1st
 Project A Project B Project C Project D
Initial investment -90000 -490000 -20000 -240000
1 20000 150000 7500 120000
2 25000 150000 7500 100000
3 30000 150000 7500 80000
4 35000 150000 7500 60000
5 40000 0 7500 0

IRR 17.43% 8.62% 25.41% 21.16%

Maximum cost of ca17,43% 8,62 % 25.41% 21.16%

a. Cost of capital 15%

Project A Project B Project C Project D

Initial investm -50000 -100000 -80000 -180000
years
1 20000 35000 20000 100000
2 20000 50000 40000 80000
3 20000 50000 60000 60000

NPV -$4,335.50 $1,117.78 $7,088.02 $6,898.99

b. Ranking not acceptable3rd 1st 2nd

c. IRR 9.70% 15.63% 19.44% 17.51%

All project will be acceptable when minimum cost of capital is 9,70%.