Compute the payback period for the two alternatives. Discuss the advantages and disadvantages…

1. Compute the payback period for the two alternatives. Discuss the advantages and disadvantages of using the payback period to evaluate capital investment decisions. Based on the results of the calculated payback period, which investment would you recommend that Mike and Tim pursue? 2. Assuming the company requires an 7% return from capital investments determine the net present value of the two alternatives. Discuss the advantages and disadvantages of using the net present value method to evaluate capital investment decisions. Based on the results of the calculated net present value, which investment would you recommend that Mike and Tim pursue? 3. Perform net present value calculations using the original cash flows but modifying the company’s required return from capital investment decisions. First, assume the required rate of return is 5%. Next, assume the required rate of return is 9%. How would these modifications affect the recommendation that you would make to Mike and Tim? 4. Assuming the company has a hurdle rate for capital investments of 7% determine the internal rate of return for the two alternatives. Discuss the advantages and disadvantages of using the internal rate of return method to evaluate capital investment decisions. Based on the results of the calculated internal rate of return, which investment would you recommend that Mike and Tim pursue?

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