other-techniques-for-capital-investment-analysis
Medina Industries
Complete the following questions using Excel. No other submission format is allowed. Review the grading rubric to confirm you are meeting the assignment requirements.
Medina Industries is considering two investment projects. The estimated cash flow in SARs for each project is as follows:
| Cost: | 2,400,000 | |
| Year | Plant Expansion | Retail Store Expansion |
| (2,400,000) | (2,400,000) | |
| 1 | 420,000 | 810,000 |
| 2 | 540,000 | 760,000 |
| 3 | 680,000 | 680,000 |
| 4 | 760,000 | 540,000 |
| 5 | 810,000 | 420,000 |
| Total | 3,210,000 | 3,210,000 |
The company has decided that the appropriate discount rate is: 10%
Required:
- Calculate the payback for each project (to 3 decimal points).
- Calculate the Net Present Value (NPV) for each project.
- Calculate the Internal Rate of Return (IRR) for each project.
- Advise management on which, if either, project to pursue and why.
- You must show all your work.
