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4.2. The following information relates to two projects for which the information is given below: Project THU 800,000 Project LHA 800,000 Project Investment Net cash
4.2. The following information relates to two projects for which the information is given below: Project THU 800,000 Project LHA 800,000 Project Investment Net cash flow Year 1 Year 2 Year 3 Year 4 40,000 160,000 800,000 80,000 480,000 320,000 500,000 40,000 The company's cost of capital is 15%. Discount factor at 15% is given below: Year 1 0.870 2 0.756 3 0.658 4 0.572 Required: a) What is meant by 'Payback period? (2 marks) b) Calculate the Payback period for each project. Which project should be chosen? (10 marks) c) Calculate the Net Present Value (NPV) of each project. Which project should be chosen? (8 marks) )
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