The Sanders Electric Company is evaluating two projects for possible inclusion in the firm's capital budget. Project M will require a $37,000 investment while project 0's investment will be $46,000. After-tax cash inflows are estimated as follows for the two projects:
YEAR PROJECT PI PROJECT 0
$12,000 $10.000
2 12,000 10,000
3 12,000 15,000
4 12,000 15,000
5 15,000
a. Determine the payback period for each project
b. Calculate the NPV and PI for each project based on a 10 percent cast of capital. Which, if either, of the projects is acceptable?
c. Determine the IRR and M1RR for Projects M and 0.