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Your company Portfolio Manager is convening a review board

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Your company Portfolio Manager is convening a review board in the
first calendar quarter to consider three projects. You have been asked to provide recommendations with respect to the capital budgeting aspects of these projects. Your recommendations will be considered by the review board along with other non-financial aspects of the projects. Initial (year 0) funding will be provided in the current year for the single project selected.
Project sponsors have provided the following estimated cash flow projections:

The company has not yet decided how the selected project will be financed. The cost of capital or hurdle rate will vary depending upon how the company decides to finance the project. You decide to compare projects in three areas: (1) payback period (not considering the cost of capital); NPV sensitivity (see note 1 below); and (3) Internal Rate of Return (IRR).
Based on your analysis, which project would you recommend and why?
Show all calculations supporting your recommendation.
Note 1: Project NPV varies inversely with the cost of funds to perform the project (expressed as the hurdle rate or k in the NPV discount factor formula). Some project NPVs are more sensitive to changes in k than others. See the NPV Profile discussion in Gallagher, Chapter 10, pages 278-279 (Reserved Readings) for information on determining NPV sensitivity.

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PMAN 650Individual Assignment 7-8Capital BudgeTngYour company Por±olio Manager is convening a review board in the frst calendar quarter to considerthree projects. You have been asked to provide recommendaTons with respect to the capital budgeTngaspects oF these projects. Your recommendaTons will be considered by the review board along withother non-fnancial aspects oF the projects. IniTal (year 0) Funding will be provided in the current year Forthe single project selected.Project sponsors have provided the Following esTmated cash ²ow projecTons:³he company has not yet decided how the selected project will be fnanced. ³he cost oF capital or hurdlerate will vary depending upon how the company decides to fnance the project. You decide to compareprojects in three areas: (1) payback period (not considering the cost oF capital); NPV sensiTvity (see note1 below); and (3) Internal Rate oF Return (IRR).Based on your analysis, which project would you recommend and why?Show all calculaTons supporTng your recommendaTon.Note 1: Project NPV varies inversely with the cost oF Funds to perForm the project (expressed as thehurdle rate orkin the NPV discount Factor Formula). Some project NPVs are more sensiTve to changes inkthan others. See the NPV Profle discussion in Gallagher, Chapter 10, pages 278-279 (ReservedReadings) For inFormaTon on determining NPV sensiTvity.
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