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Project B Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Total
Required + Inflation 21%
Inflows $0.00 $50,000.00 $150,000.00 $250,000.00 $250,000.00 $200,000.00 $180,000.00 $120,000.00 $1,200,000.00
Outflow -$300,000.00 -$100,000.00 $0.00 -$50,000.00 $0.00 -$50,000.00 $0.00 -$30,000.00 -$530,000.00
Netflow -$300,000.00 -$50,000.00 $150,000.00 $200,000.00 $250,000.00 $150,000.00 $180,000.00 $90,000.00 $670,000.00
NPV $129,536.19
==> I would fund the second project, Alpha, because the calculation shown above show a higher Net Present Value for the
second project.
Problem 6
=> Project: Tonight's the Night should be Broken Arrow's first priority because it has the highest NPV/ greatest return on investment.
Project: On the Beach should also be funded because it has a positive NPV., but do not fund the first project.
Order: Tonight's the Night, On the Beach, Time Fades Away
Problem 7
a.) Highest: Project 5 Lowest: Project 1
b.) Yes, Project 3 is now the highest. The top 3 are project 3-5-1
c.)If the rates don't accuratley reflect critical strategic factors then you
could easily select the wrong project and lose money
Weighted Total
Project 2 5 4 3 1 3
1 9 5 2 0 2 5 68
2 3 7 2 0 5 1 57
3 6 8 2 3 6 8 99
4 1 0 5 10 6 9 85
5 3 10 10 1 8 0 107
Weighted Total
Project 5 5 4 3 1 3
1 9 5 2 0 2 5 95
2 3 7 2 0 5 1 66
3 6 8 2 3 6 8 117
4 1 0 5 10 6 9 88
5 3 10 10 1 8 0 116