NET PRESENT VALUE AND INTERNAL RATE OF RETURN IBC is considering investing in two new projects – a new kiwi fruit sorting machine and a new orange sorting machine. Project Kiwifruit has an initial investment of $6,150,000 and Project Orange has an initial investment of $4,260,000. Project Kiwifruit has a terminal value after five years of $3,100,000 while Project Orange has a terminal value of $1,900,000. The firm has estimated the cash flows for the two projects as shown in the following table.

Year End Cash Flows

Year Project Kiwifruit Project Orange

1 $1,420,000 $1,575,000

2 $1,336,000 $1,575,000

3 $1,596,000 $1,575,000

4 $1,686,000 $1,575,000

5 $2,245,000 $1,575,000

For each project calculate the following:

THe cost of capital is 17.11%

(a) Net Present Value (NPV)