1a) Explain two (2) non-financial factors a company needs to consider before deciding to approve an investment with positive Net Present Value (NPV)? (6marks)
1b) Evaluate the proposed projects below. Based on the information given, which project would you choose to take on? Clearly explain your reasons. (4marks)
| | Accounting rate of return | Payback period | Net present value |
| Project 1 | 25% | 2.25 years | 69,700 |
| Project 2 | 21% | 5 years | 93,600 |
e FUTURE VALUE OF $1 RATE PER PERIOD d s 1 2 4 5 6 7 1 8 9 10 0.25% 1.00250 1.00501 1.00752 1.01004 1.01256 1.01509 1.01763 1.02018 02272 1.02273 1.02528 02528 1.02785 1.03042 1.03299 1.03557 1.03816 1.04076 1.04336 1.04597 1.04858 1.05121 1.05383 1.05647 1.05911 1.06176 1.06441 1.07778 1.09132 1.10503 1.13297 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 30 35 0.50% 1.00500 1.01003 1.01508 1.02015 1.02525 1.03038 1.03553 1.04071 1.04591 1.05114 1.05640 1.06168 1.06699 1.07232 1.07768 1.08307 1.08849 1.09393 1.09940 1.10490 1.11042 1.11597 1.12155 1.12716 1.13280 1.16140 1.19073 1.22079 1.28323 0.75% 1.00750 1.01506 1.02267 1.03034 1.03807 1.04585 1.05370 1.06160 1.06956 1.07758 1.08566 1.09381 1.10201 1.11028 1.11860 1.12699 1.13544 1.14396 1.15254 1.16118 1.16989 1.17867 1.18751 1.19641 1.20539 1.25127 1.29890 1.34835 1.45296 1.00% 1.01000 1.02010 1.03030 1.04060 1.05101 1.06152 1.07214 1.08286 1.09369 1.10462 1.11567 1.12683 1.13809 1.14947 1.16097 1.17258 1.18430 1.19615 1.20811 1.22019 1.23239 1.24472 1.25716 1.26973 1.28243 1.34785 1.41660 1.48886 1.64463 1.50% 2.00% 2.50% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 1.01500 1.02000 1.02500 1.03000 1.04000 1.05000 1.06000 1.07000 1.08000 1.09000 1.10000 1.11000 1.12000 1.03023 1.04040 1.05063 1.06090 1.08160 1.10250 1.12360 1.14490 1.16640 1.18810 1.21000 1.23210 1.25440 1.04568 1.06121 1.07689 1.09273 1.12486 1.15763 1.19102 1.22504 1.25971 1.29503 1.33100 1.36763 1.40493 1.06136 1.08243 1.10381 1.12551 1.16986 1.21551 1.26248 1.31080 1.36049 1.41158 1.46410 1.51807 1.57352 1.07728 1.10408 1.13141 1.15927 1.21665 1.27628 1.33823 1.40255 1.46933 1.53862 1.61051 1.68506 1.76234 1.09344 1.12616 1.15969 1.19405 1.26532 1.34010 1.41852 1.50073 1.58687 1.67710 1.77156 1.87041 1.97382 1.10984 1.14869 1.18869 1.22987 1.31593 1.40710 1.50363 1.60578 1.71382 1.82804 1.94872 2.07616 2.21068 1.12649 1.17166 1.21840 1.26677 1.36857 1.47746 1.59385 1.71819 1.85093 1.99256 2.14359 2.30454 2.47596 1.14339 1.19509 1.24886 1.30477 1.42331 19924 1.55133 1.68948 1.83846 1.99900 2.17189 2.35795 2.55804 2.77308 1.16054 1.21899 1.28008 1.34392 1.48024 1.62889 1.79085 1.96715 25745 2.15892 2.36736 26726 2.59374 2.83942 3.10585 1.17795 1.24337 1.31209 1.38423 1.53945 1.71034 1.89830 2.10485 2.33164 2.58043 2.85312 3.15176 3.47855 1.19562 1.26824 1.34489 1.42576 1.60103 1.79586 2.01220 2.25219 2.51817 2.81266 3.13843 3.49845 3.89598 1.21355 1.29361 1.37851 1.46853 1.66507 1.88565 2.13293 2.40985 2.71962 3.06580 3.45227 3.88328 4.36349 1.23176 1.31948 1.41297 1.51259 1.73168 1.97993 2.26090 2.57853 2.93719 3.34173 3.79750 4.31044 4.88711 1.25023 1.34587 1.44830 1.55797 1.80094 2.07893 2.39656 3.17217 3.64248 4.17725 4.78459 5.47357 1.26899 1.37279 1.48451 1.60471 1.87298 2.18287 2.54035 2.95216 3.42594 3.97031 4.59497 5.31089 6.13039 1.28802 1.40024 1.52162 1.65285 1.94790 2.29202 2.69277 3.15882 3.70002 4.32763 5.05447 5.89509 6.86604 1.30734 1.42825 1.55966 1.70243 2.02582 2.40662 2.85434 3.37993 3.99602 4.71712 5.55992 6.54355 7.68997 1.32695 1.45681 1.59865 1.75351 2.10685 2.52695 3.02560 3.61653 4.31570 5.14166 6.11591 7.26334 8.61276 1.34686 1.48595 1.63862 1.80611 2.19112 2.65330 3.20714 3.86968 4.66096 5.60441 6.72750 8.06231 9.64629 1.36706 1.51567 1.67958 1.86029 2.27877 2.78596 3.39956 4.14056 5.03383 6.10881 7.40025 8.94917 | 10.80385 1.38756 1.54598 1.72157 1.91610 2.36992 2.92526 3.60354 4.43040 5.43654 6.65860 8.14027 | 9.93357 9.93357 | 12.10031 1.40838 1.57690 1.76461 1.97359 2.46472 3.07152 3.81975 4.74053 5.87146 7.25787 8.95430 11.02627 13.55235 1.42950 1.60844 1.80873 2.03279 2.03279 2.56330 3.22510 4.04893 5.07237 6.34118 7.91108 9.84973 12.23916 | 15.17863 1.45095 1.64061 1.85394 2.09378 2.66584 3.38635 4.29187 5.42743 6.84848 8.62308 10.83471 13.58546 17.00006 1.56308 1.81136 2.09757 2.42726 3.24340 4.32194 5.74349 7.61226 10.06266 13.26768 17.44940 22.89230 29.95992 1.68388 1.99989 2.37321 2.81386 3.94609 5.51602 7.68609 10.67658 | 14.78534 20.4139728.10244 38.57485 52.79962 1.81402 2.20804 2.68506 3.26204 4.80102 7.03999 10.28572 14.9744621.72452 31.40942 45.25926 65.0008793.05097 2.10524 2.69159 3.43711 4.38391 7.10668 11.46740 18.42015 29.45703 46.90161 74.35752 117.3909 184.5648 289.0022 2.75903 40 50 PRESENT VALUE OF $1 "O -- RATE PER PERIOD 1 0.74356 0.25% 0.50% 0.75% 1.00% 1.50% 2.00% 2.50% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 0.99751 0.99502 0.99256 0.99010 0.98522 0.98039 0.97561 0.97087 0.96154 0.95238 0.94340 0.93458 0.92593 2 0.99502 0.99007 0.98517 0.98030 0.97066 0.96117 0.95181 0.94260 0.92456 0.90703 0.89000 0.87344 0.85734 3 0.99254 0.98515 0.97783 0.97059 0.95632 0.94232 0.92860 0.91514 0.88900 0.86384 0.83962 0.81630 0.79383 4 0.99006 0.98025 0.97055 0.96098 0.94218 0.92385 0.90595 0.88849 0.85480 0.82270 0.79209 0.76290 0.73503 5 0.98759 0.97537 0.96333 0.95147 0.92826 0.90573 0.88385 0.86261 0.82193 0.78353 0.74726 0.71299 0.68058 6 0.98513 0.97052 0.95616 0.94205 0.91454 0.88797 0.86230 0.83748 0.79031 0.74622 0.70496 0.66634 0.63017 0.98267 7 24 0.93272 0.96569 4 0.94904 0.90103 0.87056 0.84127 0.81309 0.75992 0.71068 0.66506 0.62275 0.58349 lu 8 0.98022 0.96089 0.94198 0.92348 0.88771 0.85349 0.82075 0.78941 0.73069 0.67684 0.62741 0.58201 0.54027 ! 9 0.97778 0.95610 0.93496 0.91434 0.87459 0.83676 0.80073 0.76642 0.70259 0.64461 0.59190 0.54393 0.50025 10 0.97534 0.95135 0.92800 0.90529 0.86167 0.82035 0.78120 0.74409 0.67556 0.61391 0.55839 0.50835 0.46319 11 0.97291 0.94661 0.92109 0.89632 0.84893 0.80426 0.76214 0.72242 0.64958 0.58468 0.52679 0.47509 0.42888 12 0.97048 0.94191 0.91424 0.88745 0.83639 0.78849 0.70138 0.62460 0.55684 0.49697 0.44401 0.39711 13 0.96806 0.93722 0.90743 0.87866 0.82403 0.77303 0.72542 0.68095 0.60057 0.53032 0.46884 0.41496 0.36770 14 0.96565 0.93256 0.90068 0.86996 0.81185 0.75788 0.70773 0.66112 0.57748 0.50507 0.44230 0.38782 0.34046 15 0.96324 0.92792 0.89397 0.86135 0.79985 0.74301 0.69047 0.64186 0.55526 0.48102 0.41727 0.36245 0.31524 16 0.96084 0.92330 0.88732 0.85282 0.78803 0.72845 0.67362 0.62317 0.53391 0.45811 0.39365 0.33873 0.29189 17 0.95844 0.91871 0.88071 0.84438 0.77639 0.71416 0.65720 0.60502 0.51337 0.43630 0.37136 0.31657 0.27027 18 0.95605 0.91414 0.87416 0.83602 0.76491 0.70016 0.64117 0.587390.49363 0.41552 0.35034 0.29586 0.25025 19 0.95367 0.90959 0.86765 0.82774 0.75361 0.68643 0.62553 0.57029 0.47464 0.39573 0.33051 0.27651 0.23171 20 0.95129 0.90506 0.86119 0.81954 0.74247 0.67297 0.61027 0.55368 0.45639 0.37689 0.31180 0.25842 0.21455 21 0.94892 0.90056 0.85478 0.81143 0.73150 0.65978 0.59539 0.53755 0.43883 0.35894 0.29416 0.24151 0.19866 22 0.94655 0.89608 0.84842 0.80340 0.72069 0.64684 0.58086 0.52189 0.42196 0.34185 0.27751 0.22571 0.18394 23 0.94419 0.89162 0.84210 0.79544 0.71004 0.63416 0.56670 0.50669 0.40573 0.32557 0.26180 0.21095 0.17032 24 0.94184 0.88719 0.83583 0.78757 0.69954 0.62172 0.55288 0.49193 0.39012 0.31007 0.24698 0.19715 0.15770 25 0.93949 0.88277 0.82961 0.77977 0.68921 0.60953 0.53939 0.47761 0.37512 0.29530 0.23300 0.18425 0.14602 30 0.92783 0.86103 0.79919 0.74192 0.63976 0.55207 0.47674 0.41199 0.30832 0.23138 0.17411 0.13137 0.09938 35 0.91632 0.83982 0.76988 0.70591 0.59387 0.50003 0.42137 0.35538 0.25342 0.18129 0.13011 0.09366 0.06763 40 0.90495 0.81914 0.74165 0.67165 0.55126 0.45289 0.37243 0.30656 0.20829 0.14205 0.09722 0.06678 0.04603 50 0.88263 0.77929 0.68825 0.60804 0.47500 0.37153 0.29094 0.22811 0.14071 0.08720 0.05429 0.03395 0.02132 9.00% 0.91743 0.84168 0.77218 0.70843 0.64993 0.59627 0.54703 2200 0.50187 0.46043 0.42241 0.38753 0.35553 0.32618 0.29925 0.27454 0.25187 0.23107 0.21199 0.19449 0.17843 0.16370 0.15018 0.13778 0.12640 0.11597 0.07537 0.04899 0.03184 0.01345 10.00% 0.90909 0.82645 0.75131 0.68301 0.62092 0.56447 0.51316 0.46651 0.42410 0.38554 0.35049 0.31863 0.28966 0.26333 0.23939 0.21763 0.19784 0.17986 0.16351 0.14864 0.13513 0.12285 0.11168 0.10153 0.09230 0.05731 0.03558 0.02209 0.00852 11.00% 0.90090 0.81162 0.73119 0.65873 0.59345 0.53464 0.48166 0.43393 0.39092 0.35218 0.31728 0.28584 0.25751 0.23199 0.20900 0.18829 0.16963 0.15282 0.13768 0.12403 0.11174 0.10067 0.09069 0.08170 0.07361 0.04368 0.02592 0.01538 0.00542 12.00% 0.89286 0.79719 0.71178 0.63552 0.56743 0.50663 0.45235 0.40388 0.36061 0.32197 0.28748 0.25668 0.22917 0.20462 0.18270 0.16312 0.14564 0.13004 0.11611 0.10367 0.09256 0.08264 0.07379 0.06588 0.05882 0.03338 0.01894 0.01075 0.00346
