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FINA 3562 Project 3 Learning objective: Students will learn how to use different methods to evaluate investment proposals.

Requirements: Please analyze the following problem and answer questions by deriving the solutions in Excel spreadsheets. You can use Project 3 Format.xlsx to work on this project. This file is available on Blackboard. Please set formulae by referencing to the data in Excel spreadsheets. If you do not meet this requirement, you will be asked to re-work on the project. This project accounts for 6% of your overall grade. Due date: April 16th, 11:59 pm on Blackboard

Problem:

Bosa Recreation Corp. is evaluating two mutually exclusive projects: Deepwater fishing and submarine ride projects. Assume the discount rate for both projects is 15 percent. The costs of investment and projected cash flows for both projects are given in the following table:

Year 0 1 2 3

Questions

DEEPWATER FISHING -$835,000 $405,000 $410,000 $335,000

SUBMARINE RIDE -$1,750,000 1,050,000 685,000 520,000

1. What is the payback period of each project? Based on the payback period, which project should be taken?

2. What is the profitability index of each project? Based on the profitability index, which project should be taken?

3. What is the internal rate of return (IRR) of each project? Based on the IRR, which project should be taken?

4. What is the net present value (NPV) of each project? Based on the NPV, which project should be taken??

For additional reference, you can review Examples 3, 17, 19, and 20 in Chapter 20 Examples.xlsx posted on Blackboard for how to compute the payback period, profitability index, IRR and NPV.

IT WOULD BE MUCH APPRECIATED IT ALL FOUR QUESTIONS CAN BE COMPLETED

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