(a). Using the net present value method, which project should be accepted? (b). Using the internal rate of return method, which project should be accepted? (c). If the cost of capital increases to 20 per cent in year 5, would your advice change?
Better plc is comparing two mutually exclusive projects, whose details are given below.
The company’s cost of capital is 12 per cent.
Project A Project B
£m £m
Year 0 (150) (152)
Year 1 40 80
Year 2 50 80
Year 3 60 50
Year 4 60 40
Year 5 80 30
(a). Using the
(b). Using the
(c). If the cost of capital increases to 20 per cent in year 5, would your advice change?
Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel.
I did my own calculation but i dont get the same answer.
For example for year 2 for project A you have 39.8597
How did you get to that without using the formula in excel.
I need to write down the actual numbers.
I got 22.3214 some im not sure how you got to that number.
Can you help me please?
Thank you
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