ABC Ltd is deciding between two projects with the following details:Project RedInitial Investment: $4,000,000Cash Flows:Year...
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Accounting
ABC Ltd is deciding between two projects with the following details:
Project Red
- Initial Investment: $4,000,000
- Cash Flows:
- Year 1: $1,500,000
- Year 2: $1,300,000
- Year 3: $1,200,000
- Year 4: $900,000
Project Blue
- Initial Investment: $3,800,000
- Cash Flows:
- Year 1: $1,400,000
- Year 2: $1,200,000
- Year 3: $1,000,000
- Year 4: $1,200,000
a. Calculate the NPV of both projects using a 9% discount rate. b. Find the IRR for each project. c. Determine which project has the shortest payback period. d. Recommend which project should be undertaken and justify your choice.
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