Question
A company can make either of the two investments at the beginning of 2021. Assuming a required rate of return of 12% p.a., evaluate the
A company can make either of the two investments at the beginning of 2021. Assuming a required rate of return of 12% p.a., evaluate the investment proposals under net present value method?
| Particulars | Project 1 | Project 2 |
| Initial investment | OMR 20, 000 | OMR 36, 000 |
| Estimated annual Cash Inflows after tax: | OMR | OMR |
| Year 1 | 4,000 | 7,500 |
| Year 2 | 5,000 | 8,500 |
| Year 3 | 6,000 | 7,500 |
| Year 4 | 9,000 | 8,000 |
| Year 5 | 3,000 | 6,000 |
What is the Net present value of Project 1?
a. None of these options
b.1675
c.765
d.-765
What is the Net present value of Project 2?
a.8721
b.None of these options
c.-8721
d.-7279
What is the investment decision Under Net present value method?
a. Accept the Project 2
b.Reject both Project
c.Accept the Project 1
d.Accept both Project
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Auditing A Practical Approach With Data Analytics
Authors: Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton
2nd Edition
1119786045, 978-1119785996
