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

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Finance

The cash flow in respect of two projects is given below. Thecost of capital is 8.5%.
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? (Please statebased on what the NPV for both questions I & II are accepted orrejected)
III        What is theAccounting rate of return (ARR) of Project A? Ans : 31.50%
IV        What is theAccounting rate of return (ARR) of Project B? Ans : 28.67%
V         What is theIRR of Project A? Use graphical and linear interpolation method.Ans : 17.67%
VI)      What is the IRR for Project B?Use graphical and linear interpolation method. Ans : 14.48%
VII)     What is the discounted paybackperiod for Project A and B? Ans : A : 4 years, B:5 years
Please state all the workings clearly, pls do not answer inexcel. Pls answer all manually with proper explanation and provideevery formulae clearly. Tq

Answer & Explanation Solved by verified expert

4.3 Ratings (661 Votes)

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

The cash flow in respect of two projects is given below. Thecost of capital is 8.5%.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? (Please statebased on what the NPV for both questions I & II are accepted orrejected)III What is theAccounting rate of return (ARR) of Project A? Ans : 31.50%IV What is theAccounting rate of return (ARR) of Project B? Ans : 28.67%V What is theIRR of Project A? Use graphical and linear interpolation method.Ans : 17.67%VI) What is the IRR for Project B?Use graphical and linear interpolation method. Ans : 14.48%VII) What is the discounted paybackperiod for Project A and B? Ans : A : 4 years, B:5 yearsPlease state all the workings clearly, pls do not answer inexcel. Pls answer all manually with proper explanation and provideevery formulae clearly. Tq

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