Question
A choice must be made between two projects, A and B. The following information is provided on each project: Year Project A Project B (i)
A choice must be made between two projects, A and B. The following information is provided on each project:
|
|
Year |
Project A |
Project B |
|
(i) Initial investment
(ii) Annual net cash inflows: |
1 2 3 4 5 |
R22 000
R10 000 R8 000 R6 000 R4 000 R3 000 |
R22 000
R3 000 R4 000 R6 000 R8 000 R10 000 |
|
|
|
R31 000 |
R31 000 |
|
(iii) The current cost of capital is 15% | |||
Future-value Factors
| Period (n) | 5% | 10% | 15% |
| 1 | 1.0500 | 1.1000 | 1.1500 |
| 2 | 1.1025 | 1.2100 | 1.3225 |
| 3 | 1.1576 | 1.3310 | 1.5209 |
| 4 | 1.2155 | 1.4641 | 1.7490 |
| 5 | 1.2763 | 1.6105 | 2.0114 |
Discounting Factors
| Period (n) | 5% | 10% | 15% |
| 1 | 0.9524 | 0.9091 | 0.8696 |
| 2 | 0.9070 | 0.8264 | 0.7561 |
| 3 | 0.8638 | 0.7513 | 0.6575 |
| 4 | 0.8227 | 0.6830 | 0.5718 |
| 5 | 0.7835 | 0.6209 | 0.4972 |
The Total net cash flow for Project A is?
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