CAPITAL APPRAISAL METHOD

Initial Investment 20000

PV1= 9936,38
PV2= 17041,58
PV3= 4631,93
NPV= -11609,89
 155
PV= 𝚺(50*1,1344^x)= 1,3*10^11
x=0
Shift solve => CF=19,8
Calculate the payback period
Raised IRR NPV
Project A -350 100 110 104 112 138 160 180 x 27,5% 83,20 đ
Project B -350 40 100 210 260 160 x x x 26,4% 63,99 đ
Project C -350 200 150 240 40 x x x x 33,0% 79,01 đ
a)
Payback period for Project A:
- Initial investment to recover = 0.35 million
- Cash inflow in the first 3 years = 0.1 million + 0.11 million + 0.104 million
= 0.314 million
Difference = 0.35 - 0.314 = 0.036 million
In the 4th year, cash inflow = 0.112 million
Time required = 0.036/0.112 = 0.32
Payback period = 3 + 0,32 = 3.32 Years

Payback period for Project B:

Initial investment to recover = 0.35 million
Cash inflow in the first 3 years = 0.04 million + 0.1 million + 0.21 million
= 0.35 million
Payback period = 3 Years

Payback period for Project C:

Initial investment to recover = 0.35 million
Cash inflow in the first 2 years = 0.2 million + 0.15 million
= 0.35 million
Payback period = 2 Years

b)
- Net Present Value (NPV) of Project A = 83.2 = 0.0832 million
(Calculated above)
- NPV of Project B = 0.06399 million
- NPV of Project C = 0.07901 million

c) The payback method provides the timeframe for recovering the initial investment. Project A requires 3.32 years, Project B necessitates 3 years, and Project C demands 2 years for investment recovery. However, prioritizing

The internal rate of return (IRR) signifies the rate at which the present value of expected cash inflows matches the initial cash outflows. It serves as the upper threshold for a viable investment, as exceeding this rate renders th

The Net Present Value (NPV) is crucial for enhancing shareholder wealth, aligning with the company's objective. Therefore, Project A, yielding the maximum NPV of 0.0832 million, should be pursued.

d) Choosing project C will eventually increase the total firm value by 0,07901 million, so the total share will increase by the same amount
 Basic data
Project X Project Y
Year 0 -200 -200
1 35 218
2 80 10
3 90 10
4 75 4
5 20 3
a)
Project X Project Y
NPV= 29,19665199 18,55424679
IRR(%)= 0,1562 0,1871
b) Would undertake project X, due to having higher NPV and meeting IRR>10% requirements

c) A director preferring to use NPV would pick project X, but one preferring to use IRR would pick project Y. So its depends on whether they prefer the absolute value of the project or the rate of return

d) Take the NPV of Project X = 18,554, we calculated the Re~13.4%, so, if the cost of capital is greater than 13,4%, the NPV of project X would be lower than project Y and thus we choose project Y.