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You have two projects to evaluate with the following cash flows:Project Q:Year 0: -$8,000,000Year 1:...

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Accounting

You have two projects to evaluate with the following cash flows:

  • Project Q:
    • Year 0: -$8,000,000
    • Year 1: $1,000,000
    • Year 2: $2,000,000
    • Year 3: $2,500,000
    • Year 4: $3,000,000
  • Project R:
    • Year 0: -$5,000,000
    • Year 1: $800,000
    • Year 2: $1,200,000
    • Year 3: $1,800,000
    • Year 4: $2,400,000
Requirements:
  1. Calculate the NPV for each project at a discount rate of 10%.
  2. Determine the IRR for each project.
  3. Identify the payback period for each project.
  4. Discuss which project should be chosen and provide a rationale.

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