Question
Teck Engineering normally expects a minimum rate of return of 12% on investments. Two projects are available but only one can be chosen. Project A
"Teck Engineering normally expects a minimum rate of return of 12% on investments. Two projects are available but only one can be chosen. Project A requires an immediate investment of $4,000,000. In return revenue payments of $4,000,000 will be received after 4 years and $9,000,000 after nine years. Project B requires an investment of .,$4,000,000 now and another $2,000,000 at the start of the third year. In return revenue payments will be received in the amount of $1,500,000 per year for nine years."
Calculate the NPV of both projects. (6 Marks)
Calculate the ROI of both projects. (4 Marks)
Determine the payback period of both projects. (2 Marks)
Which project would you choose? Why? (3 Marks)
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