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  • Tutorial - Investment Appraisal - Unit 4 Q & A

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    Alicia Absolam
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    You have been tasked with analyzing two proposed capital projects, Project A and Project B, each with an initial cost of $15,000 and a cost of capital of 12%. Project A has expected net cash flows of $7,500, $6,000, $3,000, and $1,000 over the next 4 years. Project B has expected net cash flows of $5,500, $4,500, $3,500, and $3,000. You must calculate the payback period, NPV, and IRR of each project and determine which project(s) should be accepted if the projects are independent or mutually exclusive.

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    You have been tasked with analyzing two proposed capital projects, Project A and Project B, each with an initial cost of $15,000 and a cost of capital of 12%. Project A has expected net cash flows of $7,500, $6,000, $3,000, and $1,000 over the next 4 years. Project B has expected net cash flows of $5,500, $4,500, $3,500, and $3,000. You must calculate the payback period, NPV, and IRR of each project and determine which project(s) should be accepted if the projects are independent or mutually exclusive.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    5 views2 pages

    Tutorial - Investment Appraisal - Unit 4 Q & A

    Uploaded by

    Alicia Absolam
    You have been tasked with analyzing two proposed capital projects, Project A and Project B, each with an initial cost of $15,000 and a cost of capital of 12%. Project A has expected net cash flows of $7,500, $6,000, $3,000, and $1,000 over the next 4 years. Project B has expected net cash flows of $5,500, $4,500, $3,500, and $3,000. You must calculate the payback period, NPV, and IRR of each project and determine which project(s) should be accepted if the projects are independent or mutually exclusive.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    FINANCIAL MANAGEMENT FOR ACCOUNTANTS -FIN 3015

    TUTORIAL - INVESTMENT APPRAISAL - UNIT 4

    You have been given the task of analyzing two proposed capital budgeting projects, Project A
    and Project B. Each project has a cost of $15,000, and the cost of capital for each project is 12%.
    Their expected net cash flows are:
    Expected Net Cash Flows
    Year Project A ($) Project B ($)
    0 (15,000) (15,000)
    1 7,500 5,500
    2 6,000 4,500
    3 3,000 3,500
    4 1,000 3,000

    (a) Calculate each project’s payback period, net present value (NPV), and internal rate of
    return (IRR).
    (b) Which project(s) should be accepted if they are independent? Why?
    (c) Which project(s) should be accepted if they are mutually exclusive?
    FINANCIAL MANAGEMENT FOR ACCOUNTANTS -FIN 3015

    TUTORIAL - INVESTMENT APPRAISAL - UNIT 4

    INTERNTAL RATE OF RETURN

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