Question
Your company is evaluating three projects. The cash inflows are as follows: Project 1 () Project 2 () Project 3 () Initial Investment 8,000 12,000
Your company is evaluating three projects. The cash inflows are as follows:
Project 1 (£) | Project 2 (£) | Project 3 (£) | |
Initial Investment | 8,000 | 12,000 | 10,000 |
Year 1 | 2,000 | 4,000 | 3,000 |
Year 2 | 3,000 | 5,000 | 4,000 |
Year 3 | 3,000 | 6,000 | 4,000 |
Year 4 | 4,000 | 4,000 | 5,000 |
Requirements:
- Calculate the Payback Period for each project.
- Determine the Net Present Value (NPV) at a discount rate of 11%.
- Compute the Internal Rate of Return (IRR) for each project.
- Calculate the Discounted Payback Period.
- Based on the metrics, decide which project should be undertaken.
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
12th edition
978-0324597714, 324597711, 324597703, 978-8131518571, 8131518574, 978-0324597707
