Question

Forsberg, Inc. is considering two mutually exclusive projects, A and B. Project A costs $275,000 (initial outlay) and is expected to generate $185,000 in year one and $195,000 in year two. The firm's required rate of return (discount rate) for these projects is 10%. 1. The net present value (NPV) for Project A is _____. 2. The internal rate of return (IRR) for Project A is _. Project B costs $225,000 (initial outlay) and is expected to generate $75,000 in year one, $77,000 in year two, $53,000 in year three, and $43,000 in year four. The firm's required rate of return (discount rate) for these projects is 10%. 3. The net present value (NPV) for Project B is _. 4. The profitability index (PI) for Project B is _. Part II 5. J. Currie, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three, and $45,000 in year four. The firm's required rate of return for these projects is 10%. The net present value for Project A is . 6. J. Currie, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three, and $45,000 in year four. J. Currie, Inc.'s required rate of return for these projects is 10%. The net present value for Project B is ________. Part III Bermudez Quilters is considering a project with the following cash flows: Initial Outlay = $126,000 Cash Flows: Year 1 = $44,000 Year 2 = $59,000 Year 3 = $64,000 7. If the appropriate discount rate is 11.5%, compute the NPV of this project. Part IV Your company is considering a project with the following cash flows: Initial Outlay = $3,000,000 Cash Flows Year 1-8 = $547,000 8. Compute the internal rate of return (IRR) on the project.

          Forsberg, Inc. is considering two mutually exclusive projects, A and B.
Project A costs $275,000 (initial outlay) and is expected to generate $185,000 in year one and $195,000 in year two. The firm's required rate of return (discount rate) for these projects is 10%.

1. The net present value (NPV) for Project A is ___________.
2. The internal rate of return (IRR) for Project A is _____________.

Project B costs $225,000 (initial outlay) and is expected to generate $75,000 in year one, $77,000 in year two, $53,000 in year three, and $43,000 in year four. The firm's required rate of return (discount rate) for these projects is 10%.

3. The net present value (NPV) for Project B is ___________.
4. The profitability index (PI) for Project B is ___________.

Part II

5. J. Currie, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three, and $45,000 in year four. The firm's required rate of return for these projects is 10%. The net present value for Project A is ____________.

6. J. Currie, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three, and $45,000 in year four. J. Currie, Inc.'s required rate of return for these projects is 10%. The net present value for Project B is ______________.

Part III

Bermudez Quilters is considering a project with the following cash flows:
Initial Outlay = $126,000
Cash Flows:
Year 1 = $44,000
Year 2 = $59,000
Year 3 = $64,000

7. If the appropriate discount rate is 11.5%, compute the NPV of this project.

Part IV

Your company is considering a project with the following cash flows:
Initial Outlay = $3,000,000
Cash Flows Year 1-8 = $547,000

8. Compute the internal rate of return (IRR) on the project.

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