Question
Consider the following investment projects with equal initial investments but different cash inflows: Project 1 () Project 2 () Project 3 () Initial Investment 10,000
Consider the following investment projects with equal initial investments but different cash inflows:
Project 1 (£) | Project 2 (£) | Project 3 (£) | |
Initial Investment | 10,000 | 10,000 | 10,000 |
Year 1 | 3,000 | 2,000 | 4,000 |
Year 2 | 3,000 | 3,000 | 4,000 |
Year 3 | 2,000 | 4,000 | 3,000 |
Year 4 | 2,000 | 5,000 | 2,000 |
Year 5 | 1,000 | 6,000 | 1,000 |
Requirements:
- Calculate the Net Present Value (NPV) at a discount rate of 10%.
- Compute the Internal Rate of Return (IRR).
- Determine the Payback Period.
- Analyze the Profitability Index (PI).
- Make a recommendation on which project to select based on your calculations.
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Contemporary Engineering Economics
Authors: Chan S. Park
5th edition
136118488, 978-8120342095, 8120342097, 978-0136118480
