# Wk 1

A certain project has a project cost of $387,000 and the annual inflows resulting from the product created is $64,000. What is the Payback Period?

Assume that $654,980 is to be invested in a project whose annual projected cash flows are as follows: Year 1 = $135,678, Year 2 = $156,560, Year 3 = $233,980, and Year 4 = $298,000. Assume that the required rate of return is 6.50%.

- Compute the NPV directly (i.e., without using the Microsoft Excel NPV or PV functions). Be sure to show your work.
- Should the project be pursued? Why or why not?

Assume that $1,285,673 is to be invested in a project whose annual projected cash flows are as follows: Year 1 = $235,678, Year 2 = $267,854, Year 3 = $298,054, Year 4 = $314,567, and Year 5 = $325,678. Assume that the required rate of return is 5.25%.

- Compute the NPV by using Microsoft Excel’s NPV function. Be sure to show your work.
- Should the project be pursued? Why or why not?

A company has two projects that are under evaluation. The project investment costs, annual projected cash flows, and required rates of return are shown below:

**Project 1 Project 2**

Rate of Return:

0.065 0.065

Project Cost:

-$1,397,654 -$1,619,835

Year 1

$245,367 $267,345

Year 2

$302,542 $343,563

Year 3

$316,543 $367,834

Year 4

$367,843 $432,098

Year 5

$450,425 $589,435

- Compute the NPV for each project using Microsoft Excel NPV’s function. Be sure to show your work.
- Which project should be pursued? Why?