Week 5
Project
Instructions
The Allied Group is considering two investments. The first
investment involves a packaging machine, which can be used to package garments
for shipping orders to customers. The second possible investment would be a
molding machine that would be used to mold the mannequin parts.
The first possible investment is the packaging machine,
which will cost $14,000. The second investment, the molding machine, would cost
$12,000. The expected cash flows for the two projects are given below and the
cost of capital to the firm is 15%. Both machines will be unusable after five
years and have no salvage value.
The net cash flows for the two possible projects are given
in the following table:
Year
Packaging Machine
Molding Machine
0
($14000)
($12,000)
1
4100
3200
2
3300 2800
3
2900
2800
4
2200
2200
5
1200 2200
Address all of the following questions in a brief but
thorough manner.
What is each project’s payback period? Provide a detailed
explanation of how you calculated the payback period for each.
What is the NPV for each project? Provide a detailed
explanation of how you calculated the payback period for each.
What is the IRR for each project? Provide a detailed
explanation of how you calculated the internal rate of return (IRR) for each.
If both of the projects can be selected, then should both be
selected? Why or why not? Explain why or why not.If the two projects are
mutually exclusive, which project, if any, should be selected? Explain why.
Submission Details:
Submit your 4 to 5 page Microsoft Word document, using APA style.
Name your report: MBA5009_W5_ LastName_FirstInitial.doc.
Submit to the Submissions Area by the due date assigned.
