The managing director of Stuarts Boatyard Ltd has £500,000 to invest in a new marine project and has asked you to provide information that will help him choose which is the more favourable of two projects. Details of the annual cash flows are as follows and these are assumed to arise evenly throughout the year:

(a) Calculate the discounted payback period for each project and the net present value of each project using an interest rate of 6%.

(b) Recommend which of the two projects should be chosen, giving reasons to support your advice.

(c) Comment on any limitations of the techniques you have used.

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Year Project 1 Project 2 12345 80,000 90,000 100,000 110,000 180,000 190,000 140,000 110,000 100.000 80,000