The cost of capital for Project A is 12% and the cost of capital for Project B is 18%. Calculate; The discounted payback period and The net present value for Project A The discounted payback period and The net present value for Project A The IRR for Project A & Project B If the projects are mutually exclusive which project should be selected
- Management is considering two hotel projects. Project A will be in Belize and Project B will be in Cuba.
|
Initial Investment |
Project A US$ |
Project B US$ |
|
Year 0 |
865,000 |
750,000.00 |
|
Year 1 |
316,000 |
200,000.00 |
|
Year 2 |
330,000 |
200,000.00 |
|
Year 3 |
280,000 |
185,000.00 |
|
Year 4 |
250,000 |
390,000.00 |
|
Year 5 |
250,000 |
551,000.00 |
The cost of capital for Project A is 12% and the cost of capital for Project B is 18%. Calculate;
- The discounted payback period and The
net present value for Project A - The discounted payback period and The net present value for Project A
- The
IRR for Project A & Project B - If the projects are mutually exclusive which project should be selected?
- Mangement is considering two hotel projects. Project A will be in Jamaica with an intial investment of $865,000 and Project B will be in Canada with an initial investment of $750,000
|
Years |
Project A |
Project B |
|
Year 1 CashFlow |
316,000.00 |
200,000.00 |
|
Year 2 CashFlow |
350,000.00 |
200,000.00 |
|
Year 3 CashFlow |
(20,000.00) |
(15,000.00) |
|
Year 4 CashFlow |
280,000.00 |
390,000.00 |
The cost of capital for Project A is 13% and the cost of capital for project B is 15%.
Calculate the following;
- Calculate the discounted payback period of Project A
- Calculate the discounted payback period of Project B.
- Calculate the net present value for Project A
- Calculate the net present value for Project B.
- Management can only accept one project. Which project should management accept? Explain your answer
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