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Onyx Inc. has four potential projects to consider for investment in the next financial period. The following table summarises an appraisal of the projects
Onyx Inc. has four potential projects to consider for investment in the next financial period. The following table summarises an appraisal of the projects using different analysis tools: Payback (Years) NPV(10%) -$610 Project A 4 3.5 +$2,430 +$3,610 +$4,790 C 3.8 D 4.2 [TASK] i. Why was the payback technique inadequate on its own to assess the four projects? Explain clearly what the +$2,430 Net Present Value (NPV) for project B means. Both payback period and net present value techniques employ cash flows forecast in their analyses. Why do you think that cash flow forecasts are used rather than profit forecasts to assess the viability of the proposed projects? Explain your ii. iii. answer.
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