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The following data is related to two investment projects, and only one project may be selected: Notes: Profit is calculated after deducting straight-line depreciation The

The following data is related to two investment projects, and only one project may be selected:

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Notes:

  1. Profit is calculated after deducting straight-line depreciation
  2. The cost of capital is 10%

Required:

(a) Calculate for each project:

(i) Payback period

(ii) Net present value (NPV)

c. Explain which project you would recommend for acceptance.

d. discuss npv

Project (A) () capital 25,000 Project (B) () 25,000 Initial expenditure Profit (loss) year 1 17,500 2 15,000 3 12,500 4 10,000 Estimated resale value 5,000 at end of year 4 10,000 10,000 12,000 18,000 5,000

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