Question
A Ltd. company has evaluated the potential for investment in 2 (project A and project B). Both projects have been shown to be worthwhile investment
A Ltd. company has evaluated the potential for investment in 2 (project A and project B). Both projects have been shown to be worthwhile investment but a choice has to be made between them. Cash flows are estimated to be:
Project A Project B $000 $000 Year 0 (3000) (3000) Year 1 600 1,200 Year 2 900 1,200 Year 3 1,200 1,200 Year 4 1,500 1,200 Year 5 1,800 1,200
Estimate for each project A) The payback period in years (to 3 decimal value)
B) The Net Present Value
C)Calculate the net present value (NPV) of each project using a discount rate of 12% per annum. The following discount factors apply at 12% D) Breif which project A or Project B you would suggest for acceptance stating the advantages and disadvantages of each of the consideration techniques used above
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