Option #2: Capital Budgeting Analysis Suppose you are the financial manager of a firm considering the...

Option #2: Capital Budgeting Analysis

Suppose you are the financial manager of a firm considering the following five projects.

	Project A	Project B	Project C	Project D	Project E
Initial Investment	-$10,000	-$15,000	-$14,000	-$6,000	-$1,500
Year 1	$5,000	$5,000	$6,000	$4,000	$1,000
Year 2	$4,000	$5,000	$4,000	$2,000	$250
Year 3	$2,000	$5,000	$3,500	$2,000	$100
Year 4	$1,000	$5,000	$2,500	$2,000	$100
Year 5		$5,000	$2,000		$100
Year 6			$2,000		$100

Calculate the Payback Period for each project.
Calculate the NPV for each project, assuming a discount rate of 11%.
Calculate the IRR for each project.
Which projects should the firm implement based on your analysis If the projects are mutually exclusive? What if they are independent? Write an email to your CFO explaining your rationale proving the choices based on the considerations of shareholder value. Assume there is no capital constraint and any desired projects can be funded.

Solutions

Expert Solution

Calculations are given below and please refer star marks given in project A as a guide to calculations given after table.

jeff jeffy answered 4 months ago

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