Maxwell Software, Inc., has the following mutually exclusive projects. Y ear Pro
ID: 2743334 • Letter: M
Question
Maxwell Software, Inc., has the following mutually exclusive projects.
Year Project A Project B
0 –$22,000 –$25,000
1 13,000 14,000
2 9,500 10,500
3 3,100 9,500
Calculate the payback period for each project. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)
Project A (in years)
Project B (in years)
What is the NPV for each project if the appropriate discount rate is 16 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Project A NPV
Project B NPV
Calculate the payback period for each project. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)
Project A (in years)
Project B (in years)
What is the NPV for each project if the appropriate discount rate is 16 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Project A NPV
Project B NPV
Explanation / Answer
PROJECT - A: cumulative Year cash flow cash flow pvif @ 16% PV @ 16% 0 -22000 1.0000 -22000.00 1 13000 13000 0.8621 11206.90 2 9500 22500 0.7432 7060.05 3 3100 25600 0.6407 1986.04 -1747.02 Payback period = 1 + 9000/9500 = 1.947 years NPV = -$1747.02 PROJECT - B: cumulative Year cash flow cash flow pvif @ 16% PV @ 16% 0 -25000 1.0000 -25000.00 1 14000 14000 0.8621 12068.97 2 10500 24500 0.7432 7803.21 3 9500 34000 0.6407 6086.25 958.42 Payback period = 2 + 500/9500 = 2.053 years NPV = $958.42