Question 1.

(a) What is the importance of Capital Budgeting? Briefly and logically explain the difference between Net Present Value (NPV), Internal Rate of Return (IRR) and Discounted Payback Period. Which technique provides more insightful investment appraisal. (b) A project cost $ 25,000 and it generates cash inflows through a period of five years $ 9,000, $ 8,000, $ 7,000, $ 6,000 and $ 5,000. The required rate of return is assumed to be 10%. Find out the Net Present Value of the project.