Exercise (NPV) - 20 mins Project A, B and C have the following cash-flow projections: Year Project B Project C Project A (S) (S) -10,000 -10,000 3.000 1,000 3,000 2,000 3,000 . 4,000 3,000 8,000 0 1 2 3 4 -14,000 8,000 8,000 -3,000 -5,000 Calculate the Payback Period and Net Present Value (NPV) for each of the projects shown. Assume, i-10% a Decide which is the best project. Justify! What is the advantages of IRR over NPV as a measure of profitability?

Exercise (NPV) - 20 mins Project A, B and C have the following cash-flow projections: Year Project B Project C Project A (S) (S) -10,000 -10,000 3.000 1,000 3,000 2,000 3,000 . 4,000 3,000 8,000 0 1 2 3 4 -14,000 8,000 8,000 -3,000 -5,000 Calculate the Payback Period and Net Present Value (NPV) for each of the projects shown. Assume, i-10% a Decide which is the best project. Justify! What is the advantages of IRR over NPV as a measure of profitability?

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

Problem 1PS

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Question

Exercise (NPV) - 20 mins
Project A, B and C have the following cash-flow projections:
Year
Project A
(S)
-10,000
3.000
0
1
2
3
3,000
3.000
3,000
Project B
(S)
-10,000
1,000
2,000
. 4,000
8,000
Project C
(S)
-14,000
8,000
8,000
-3,000
-5,000
* Calculate the Payback Period and Net Present Value (NPV) for each of
the projects shown. Assume, i=10%
Decide which is the best project. Justify!
What is the advantages of IRR over NPV as a measure of profitability?

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Step 1: PAYBACK PERIOD, Net Present Value,

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Step 2: Payback period

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Step 3: NPV Of Project

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Step 4: Decision on best project

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