Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, that both cost $170,000. The company's board of directors has set a 4-year payback requirement the cost of capital is 11%. The project cash flows are shown in the following table attached. a. Calculate the payback period for each project. Rank the projects by payback period. b. Calculate the NPV of each project. Rank the project by NPV. c. Calculate the IRR of each project. Rank the project by IRR.
Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, that both cost $170,000. The company's board of directors has set a 4-year payback requirement the cost of capital is 11%. The project cash flows are shown in the following table attached. a. Calculate the payback period for each project. Rank the projects by payback period. b. Calculate the NPV of each project. Rank the project by NPV. c. Calculate the IRR of each project. Rank the project by IRR.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, that both cost $170,000. The company's board of directors has set a 4-year payback requirement the cost of capital is 11%. The project
a. Calculate the payback period for each project. Rank the projects by payback period.
b. Calculate the NPV of each project. Rank the project by NPV.
c. Calculate the IRR of each project. Rank the project by IRR.
d. Make a recommendation.
 alt="(Click on the icon here in order to copy the contents of the data table below
into a spreadsheet.)
Cash flows (CF)
Year
Project A
Project B
1
$50,000
$75,000
$50,000
$70,000
$30,000
3
$50,000
4
$50,000
$50,000
$30,000
$30,000
$50,000
$30,000
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Transcribed Image Text:(Click on the icon here in order to copy the contents of the data table below
into a spreadsheet.)
Cash flows (CF)
Year
Project A
Project B
1
$50,000
$75,000
$50,000
$70,000
$30,000
3
$50,000
4
$50,000
$50,000
$30,000
$30,000
$50,000
$30,000
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