Cash Flow Projects (in £):ProjectsInitial InvestmentYear 1Year 2Year 3Year 4Year 5A-£50,000£15,000£20,000£10,000£5,000£8,000B-£60,000£10,000£15,000£20,000£25,000£5,000Required:Compute the payback period for...
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Cash Flow Projects (in £):
Projects | Initial Investment | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
A | -£50,000 | £15,000 | £20,000 | £10,000 | £5,000 | £8,000 |
B | -£60,000 | £10,000 | £15,000 | £20,000 | £25,000 | £5,000 |
Required:
- Compute the payback period for each project.
- If the standard payback period is 4 years, which project is preferable?
- Calculate the NPV of each project assuming a discount rate of 10%.
- Determine the internal rate of return (IRR) for each project.
- Assess the profitability index (PI) for both projects.
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