The Sanders Electric Company is evaluating two projects for
possible inclusion in the firm’s capital budget. Project M will
require a $37,000 investment while project O’s investment will be
$46,000. After-tax cash inflows are estimated as follows for the two
YEAR PROJECT M PROJECT O
1 $12,000 $10,000
2 12,000 10,000
3 12,000 15,000
4 12,000 15,000
a. Determine the payback period for each project.
b. Calculate the NPV and PI for each project based on a 10
percent cost of capital. Which, if either, of the projects is
c. Determine the IRR and MIRR for Projects M and O.