In: Finance
X construction is considering two projects to develop. The
estimated net cash flow from each
project is as follows:
Project X | Project Y | |
Year 1 | 110,000 | 75,000 |
Year 2 | 65,000 | 150,000 |
Year 3 | 100,000 | 60,000 |
Year 4 | 115,000 | 55,000 |
Year 5 | 35,000 | 60,000 |
Project requires an investment of $200,000. A rate of 15% has
been selected for the NPV
analysis.
Requires to
a) Calculate Payback period, ARR, Net Present Value and
Profitability Index
b) Which Project is to be recommended to develop based on NPV,
Profitability Index,
Payback period and ARR? Suggest