All techniques with NPV profile—Mutually exclusive projects Custom Essay

P10-24 All techniques with NPV profile—Mutually unpopular designs: Designs A and B, of similar betray, are alternatives restraint expanding Rosa Company’s size. The firm’s absorb of cardinal is 13%. The capital flows restraint each design are shown in the cethcoming consideration.

a. Calculate each design’s payback bound.

b. Calculate the entangle confer-upon appreciate (NPV) restraint each design.

c. Calculate the interior reprimand of give-back (IRR) restraint each design.

d. Draw the entangle confer-upon appreciate profiles restraint twain designs on the identical fixed of axes, and debate any combat in ranking that may be between NPV and IRR.

e. Summarize the preferences dictated by each estimate, and specify which design you would advise. Explain why.

Initial bombardment (CF0)

Design A

Design B

$80,000

$50,000

Year (t)

Capital inflows (CFt)

1

$15,000

$15,000

2

20,000

15,000

3

25,000

15,000

4

30,000

15,000

5

35,000

15,000

 

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