Using the net present value method of investment appraisal, contrast two projects, C and D. Project C will cost £10,000 and will generate £9,000 p.a. for three years.

Project D will cost £12,000 but will generate £7,000 p.a. for four years. The discount rate is 6% p.a. Relevant discount factors are:

Year 1 0.943 Year 2 0.890 Year 3 0.840 Year 4 0.792