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For each project, calculate the NPV, IRR, profitability index (PI) and the payback period

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For each project, calculate the NPV, IRR, profitability index (PI) and the payback period. For each capital budgeting decision tool, indicate if the project should be accepted or rejected, assuming that each project is independent of the others. Important Note: The venture capital folks, when considering payback period, have a firm maximum payback period of four years. This 4-year payback period has no impact on other capital budgeting analysis techniques, each is to be considered on its own. In other words, yes, all cash flows need to be considered for NPV, IRR, and PI.        

Project A Interest rate 12.80%

Project B interest rate is 14.30%

Project C interest rate is 10.55%

Project D interest rate is 8.30%

Expected cash flows for the four potential projects that Belfry is considering as shown below:

 

Years Project A Project B Project C Project D

0 -$8,750,000 -8,000,000 -5,500,000 -5,575,000

1 2,500,000 2,000,000 2,000,000 1,500,000

2 2,500,000 2,000,000 1,500,000 1,500,000

3 2,000,000 2,000,000 1,500,000 1,000,000

4 2,000,000 1,500,000 1,500,000 1,000,000

5 1,500,000 1,200,000 1,000,000 1,000,000

6 1,500,000 1,200,000 1,000,000

7 1,500,000 1,200,000 500,000

8 500,000 500,000

9 250,000

10 250,000