FIN 370 Wk 4 Team Assignment; Caledonia Products Integrative Problem

. 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?

Project A’s payback period is 3.125 years.

Project B’s payback period is 4.5 years.

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