please answer the following question 12

please answer the following question 12

1. Payback Analysis

Two new wind-farm tower projects are proposed for a small company

that installs them in south western Pennsylvania. Project A will

cost $250,000 to complete and is expected to have an annual net

cash flow of $75,000. Project B will cost $150,000 to complete and

should generate annual net cash flows of $52,000. As a small

company, the owner and senior management team are very concerned

about their cash flow.

Use the payback period method and determine which project is better

from a cash flow standpoint.

Show your work and include any formulas used to calculate PP.

2. Net Present Value

A recent project nominated for consideration at your company has a four-year cash flow of $20,000; $25,000; $30,000; and $50,000. The cost of the project is $75,000.

a. If the required rate of return is 20%, conduct a discounted cash flow

calculation to determine the NPV.

b. What is the benefit-cost ratio for the project?

c. What would the NPV of the above project be if the inflation rate was expected to be 4% in each of the next four years?

You will be assessed on the correctness of your calculations (40 points) and on presenting your work and results in a professional manner (10 points)

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