Question: Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows:
|
YEAR
|
PROJECT A
|
PROJECT B
|
|
0
|
-$100,000
|
-$100,000
|
|
1
|
32,000
|
0
|
|
2
|
32,000
|
0
|
|
3
|
32,000
|
0
|
|
4
|
32,000
|
0
|
|
5
|
32,000
|
$200,000
|
The required rate of return on these projects is 11 percent.
Q1. What is each project’s payback period?
Q2. What is each project’s net present value?