3. The cash flow in respect of two projects is given below. The cost of capital...

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Finance

3.         The cash flowin respect of two projects is given below. The cost of capital is8.5%.
Year
Project A
Project B
0
(200)
(300)
1
65
100
2
65
100
3
65
90
4
60
70
5
60
70
Answer the following question using the above information.
I          What is the NPV of Project A? Should this project be accepted?
II         What is theNPV of Project B? Should this project be accepted?
III        What is theAccounting rate of return (ARR) of Project A?
IV        What is theAccounting rate of return (ARR) of Project B?
V         What is theIRR of Project A? Use graphical and linear interpolationmethod.
VI)      What is the IRR for Project B?Use graphical and linear interpolation method.
VII)     What is the discounted paybackperiod for Project A and B?

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Project A Years Amount Discounting Factor Present value 1 65 0921658986 599078341 2 65 0849455287 5521459364 3 65 0782908098 508890264 4 60 0721574284 4329445706 5 60 0665045423 399027254 Total Present value of cash inflows See Answer

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Transcribed Image Text

3. The cash flowin respect of two projects is given below. The cost of capital is8.5%.YearProject AProject B0(200)(300)165100265100365904607056070Answer the following question using the above information.I What is the NPV of Project A? Should this project be accepted?II What is theNPV of Project B? Should this project be accepted?III What is theAccounting rate of return (ARR) of Project A?IV What is theAccounting rate of return (ARR) of Project B?V What is theIRR of Project A? Use graphical and linear interpolationmethod.VI) What is the IRR for Project B?Use graphical and linear interpolation method.VII) What is the discounted paybackperiod for Project A and B?

Year	Project A	Project B
0	(200)	(300)
1	65	100
2	65	100
3	65	90
4	60	70
5	60	70