Sam Henwood Ltd is trying to decide which project should be taken up, out of three possible investments. The initial investment would amount to £40,000. Scrap value at the end of use would be nil.

The cost of capital is 9%, for which discount factors are as follows:

The net cash inflows from the three projects under consideration are:

For each possible project you are required to calculate:

i. payback;

ii. net present value.

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Year Present value of 1 12345 1 0.917 0.842 3 0.772 0.708 5 0.650