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    Choosing a Project Based on ROR, Payback, NPV, etc.

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    A company is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows:

    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.
    1. What is each project's payback period?
    2. What is each project's net present value?
    3. What is each project's internal rate of return?
    4. What has caused the ranking conflict?
    5. Which project should be accepted? Why?

    Please use excel so I can see how the formulas worked.

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    Solution Summary

    Solution attached in Excel finds the payback period, net present value, internal rate of return and any ranking conflicts in order to pick the best of two projects.