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Q1) Henn Corp, Ltd. is studying two investment projects as a part of its expansion plan for coming year. These two projects are not mutually exclusive. Cost of Project A is $12,950 where as second project (B) is expected to cost $18,625. Henn's cost of capital (required rate of return) is 11.5%. Expected annual cash flows are projected to be as follows:

Year  Project A Project B
 1   3,250.00   6,850.00
 2   3,250.00   6,850.00
 3   3,250.00   6,850.00
 4   3,250.00   6,850.00
 5   3,250.00   6,850.00

Each project will last estimated 5 years with no remaining significant scrap value. Find out IRR and NPV for each of these two projects. What must Henn Corp decide about each proposed project.

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  • Category:- Accounting Basics
  • Reference No.:- M919500

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