Barcelona Windsurfing Ltd (Based in Cornwall- UK!!!) is considering carrying out a major program of staff training.

The training scheme will cost 100,000 and will be paid for immediately. It is expected to produce additional cash flows as follows:

The discount rate is 10%.

(This question should not be done through Excel)

Cash Flow ()

Year 0 (100,000)

Year 150,000

Year 240,000

Year 330,000

Year 430,000

Year 5 20,000

1)

(a) Work out the Net present Value of the investment

(b) If the discount rate fell to 5%, what would be the Net Present Value?

2)

a) Using the above figures, work out the Accounting rate of Return (ARR) for the training scheme.

b) What are the main criticisms with the NPV when making an investment decision?