=+(2) Compare the relative theoretical and practical merits and demerits of each of the methods used.

Assume: No tax or inflation.

4 A firm is considering investing in a project with the following cash flows:

Year 1

2 3.

4 6

7 8

Net cash flow (£) 1,000 1,500 2,000 1,750 1,500 1,000 500 500