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"Ormsbee Aviation, Inc., is considering two potential investments. Each project will cost $70,000 and have an expected life of five years.

"Ormsbee Aviation, Inc., is considering two potential investments.
Each project will cost $70,000 and have an expected life of five
years. The CFO has estimated the probability distributions for each
project’s cash flows as shown in the following table.
Probability Project 1 Project 2
25% $15,000 $12,000
50% 25,000 30,000
25% 35,000 48,000
The company believes that the probability distributions apply to each year of the five years of
the projects’ lives. Ormsbee Aviation uses the risk-adjusted discount rate technique to evaluate
potential investments. As a guide for assigning the risk premiums, the CFO has put together the
following table based on the coefficient of variation.
Coefficient of Variation Risk Premium
0.00 -2.00%
0.20 0.00%
0.30 2.00%
0.40 3.00%
0.50 4.00%
. Using the appropriate discount rates, calculate the payback period, discounted payback period, NPV, PI, IRR, and MIRR for each project
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