Taghi Mammadov 3820221052

Year PROJECT A Cumulative CF PROJECT B Cumulative CF

0 -10000 -10000 -12000 -12000
1 6500 -3500 7000 -5000
2 4000 500 4000 -1000
3 1800 2300 5000 4000

Payback Period = Years before full recovery + Unrecovered cost at the start of the year / Cash flow during the year

Particulars Project A PROJECT B

Years before full recovery 1 2
Uncrecovered cost at beginning 3500 1000
Cashflow during year 4000 5000
Payback period 1.875 2.2
1.88 2.20

If the payback period cut-off of Fuji is 2 years, then Project A should be choosen which has a payback period of
1.88 years

Year PVIF = PROJECT A PROJECT B PV of CF (A) PV of CF (B)

1/(1+0.15)^n
0 1.0000 -10000 -12000 -10000.00 -12000.00
1 0.8696 6500 7000 -5652.17 6086.96
2 0.7561 4000 4000 3024.57 3024.57
3 0.6575 1800 5000 1183.53 3287.58
NPV -139.72 399.11

s per NPV method, Project B is generating positive NPV of 399.11 whereas Project A isgenerating
negative NPV of 139.72. Hence, Project B should be choosen

The two rule does not yeild the same results. As per payback period,
Project A is better and as per NPV method, Project B is better