Capital Budgeting

Exercise 1

A project with initial outlay of Sh200,000 promises the following cash flows Year 1 2 3 4 Cashflow Kshs. 90, 000 80, 000 50, 000 60, 000 If cost of capital is 10%, compute payback period, IRR and NPV of the project. Comment on your results

Exercise 2

A project with initial outlay of Sh1,200,000 promises equal cash flow of Sh350,000 every year for five years. If the cost of capital is 10%, compute payback period, IRR and NPV of the project. Comment on your results