Share
Explore BrainMass

NPV and payback peiod

Please find the attached problem. I am having trouble calculating the payback period & net present value.

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.

a. What is each project's payback period?

b. What is each project's net present value?

Attachments

Solution Preview

Please see the attached file.

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.

a. What is each project's payback period?

Payback period is the time taken to recover the initial investment.
Project A - The initial investment is $100,000. The ...

Solution Summary

The solution explains how to calculate the NPV and Payback period for projects.

$2.19