Solution:
Performance on Criteria
High
Project
Criteria
Project A
Payoff Potential
Lack of Risk
Safety
Competitive Advantage
Project B
Project C
Project D
Low
x
x
x
x
Payoff Potential
Lack of Risk.
Safety
Competitive Advantage
x
x
x
x
x
Payoff Potential
Lack of Risk
Safety
Competitive Advantage
Payoff Potential
Lack of Risk
Safety
Competitive Advantage
Medi um
x
x
x
x
x
x
x
According to this checklist, it appears that Project D is the best option, as all ratings are
either High or Medium. Project C is the worst with only two Medi um and two Low
ratings.
Solution:
Project
Criteria
(A)
Importance
Weight
(B)
Score
(A) x (B)
Weighted
Score
Project A
Payoff Potential
4
3
12
Lack of risk
3
1
3
Safety
1
3
3
Competitive Ad vantage
3
2
6
Total Score
24
Project
Criteria
Weight
Score
.
Project B
Payoff Potential
4
1
4
Lack of risk
3
2
6
2
2
2
6
Safety
Competitive Advantage
1
3
Total Score
18
Project C
Payoff Potential
4
2
8
Lack of risk
3
2
6
Safety
Competitive Advantage
1
3
1
1
Total Score
1
3
18
Project D
Payoff Potential
4
3
12
Lack of risk
3
3
9
2
2
2
6
Safety
Competitive Advantage
Total Score
1
3
29
Therefore: Choose Project D, which has the highest total score of 29, and the worst is
Project C and B. With lowest score of 18
Solution:
Project Carol
Year inflows
Outflows
Net-flows
Discount Factor
NPV
0
500,000
(500,000)
1.000
(500,000)
1
50,000
50,000
0.81
40,500
2
250,000
250,000
0.66
165,000
4
350,000
350,000
0.54
189,000
Total
$(105,500)
Project George
Year
Inflows
0
Outflows
Net flows
Discount Factor
NPV
250,000
(250,000)
1.000
(250,000)
1
75,000
75,000
0.81
60,750
2
75,000
75,000
0.66
49,500
3
75,000
75,000
0.54
40,500
4
50,000
50,000
0.44
22,000
Total
$(77,250)
Project Thomas
Year
Inflows
0
Outflows
Net flows
Discount Factor
NPV
1,000,000
(1,000,000)
1.000
(1,000,000)
1
200,000
200,000
0.81
162,000
2
200,000
200,000
0.66
132,000
3
200,000
200,000
0.54
108,000
4
200,000
200,000
0.44
88,000
5
200,000
200,000
0.36
72,000
6
200,000
200,000
0.29
58,000
$(380,000)
Total
Project Anna
Year
Inflows
0
Out flows
Net f lows
Discount Factor
NPV
75,000
(75,000)
1.000
(75,000)
1
15,000
15,000
0.81
12,150
2
25,000
25,000
0.66
16,500
3
50,000
50,000
0.54
27,000
4
50,000
50,000
0.44
22,000
5
150,000
150,000
0.36
54,000
Total
$56,650
Conclusion s:
The only project worth investing in is Project Anna, because it is the only project with a
positive projected NPV. Each of the other three will not pay back the initial investment due
to the high cost of capital (discount rate) the firm uses.