As a Financial Analyst of Morgan Investments Co., you are going to make a business investment decision on which of the two possible investments the company should undertake. Both projects cost £200,000 with a rate of return of 12%. Below are the cash profits of the two projects: Year Project A Project B Profits (£) 1 36,000 37,300 2 42,000 40,000 3 56,000 56,000 4 44,000 51,000 5 35,000 39,650 6 32,500 42,500 7 66,000 80,000 Question one: Using NPV and IRR methods, appraise the two projects and advise the Financial Directors which of the projects is viable and why. Question two: Which of the methods is superior? Justify your answer.
As a Financial Analyst of Morgan Investments Co., you are going to make a business investment decision on which of the two possible investments the company should undertake. Both projects cost £200,000 with a rate of return of 12%. Below are the cash profits of the two projects: Year Project A Project B Profits (£) 1 36,000 37,300 2 42,000 40,000 3 56,000 56,000 4 44,000 51,000 5 35,000 39,650 6 32,500 42,500 7 66,000 80,000 Question one: Using NPV and IRR methods, appraise the two projects and advise the Financial Directors which of the projects is viable and why. Question two: Which of the methods is superior? Justify your answer.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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As a Financial Analyst of Morgan Investments Co., you are going to make a business investment decision on which of the two possible investments the company should undertake. Both projects cost £200,000 with a rate of return of 12%. Below are the cash profits of the two projects: Year Project A Project B Profits (£) 1 36,000 37,300 2 42,000 40,000 3 56,000 56,000 4 44,000 51,000 5 35,000 39,650 6 32,500 42,500 7 66,000 80,000 Question one: Using NPV and IRR methods, appraise the two projects and advise the Financial Directors which of the projects is viable and why. Question two: Which of the methods is superior? Justify your answer.
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