Reference no: EM132569642

Medical Technology Enterprises is trying to select the best investment from among four alternatives. The company's cost of capital (WACC) is 12%. The initial cost and future cash flows of the alternatives are presented below. Use Excel to solve this problem.

Year Alternative A ($) Alternative B ($) Alternative C ($) Alternative D ($)

0 -400,000 -400,000 -400,000 -400,000
1 250,000 0 100,000 50,000
2 150,000 0 100,000 100,000
3 170,000 120,000 100,000 100,000
4 80,000 180,000 100,000 400,000
5 40,000 500,000 100,000 0a

1) Calculate the Payback period for each alternative and complete the following table round to two decimal:

Alternative A Alternative B Alternative C Alternative D

Payback period

2) Which of the alternatives to select under the payback method? Explain why.

3) Calculate the net present value (NPV) for each alternative and complete the following table round to whole numbers:

Alternative A Alternative B Alternative C Alternative D

NPV

4) D) Which of the alternative to select under the net present value? Explain why.

5) Calculate the internal rate of return (IRR) for each alternative and complete the following table round to two decimal:

Alternative A Alternative B Alternative C Alternative D

IRR

6) Which of the alternative to select under the internal rate of return? Explain why.