1. Launching a new product would initially cost Company XYZ $10,000 for each product. The financial

1. Launching a new product would initially
cost Company XYZ $10,000 for each product. The financial analysts projected net
cash flows for each product as provided for below and there is 6% cost of
capital.
Outflows/Inflows Investment Yr
1 Yr 2 Yr 3 Yr 4
Project 1 (10,000) 2,000 5,000 6,000 4,000
Project 2 (10,000) 500 700 4,500 9,000
(a) Calculate the Present Value for the
Project 1. (Worth 0.5 points)
(b)
What is the Net Present Value for Project? (Worth 1 point)
(c)
Calculate the Net Present Value for the Project 2. (Worth 2 points)
(d)
If the projects were mutually exclusive which project should be rejected?
(Worth 0.5 points)
(e)
What is the internal rate of return for Project 1? (Worth 1 point)
(f)
What is the internal rate of return for Project 2? (Worth 1 point)
(g)
What NPV assumption is involved in finding the IRR of any project? Why is this
the assumption? (Worth 1 point)

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