Fitch Industries

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 Fitch Industries is in the process of choosing the better of two equal-risk, mutually exclusive capital expenditure projects, M and N. The relevant cash flows for each project are shown in the following table. The firm’s cost of capital is 14%.

Project M

Project N

Initial Investment (CF)

$28,000

$27,000

Year (t)

Cash inflows (CFt)

1

$10,000

$11,000

2

$10,000

$10,000

3

$10,000

$9,000

4

$10,000

$8,000

a. Calculate each projects payback period

b. Calculate the net present value (NPV) for each project

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