Year Investment A Investment B 0 (400,000) (450,000) 1 75,000 60,000 2 75,000 60,000 3 100,000 125,000 4 100,000 125,000 5 100,000 125,000 6 140,000 125,000 (i) Calculate the Payback period and the Average Rate of Return FOR EACH investment and explain in each case which would be the more attractive. (ii) Calculate the NPV for each investment assuming a discount rate of 12% and explain in this case which would be the more attractive. (iii) Calculate the IRR for each investment and explain in this case which would be the more attractive.
Q2
Your investment client has been offered the following two mutually exclusive investments:
Year Investment A Investment B
0 (400,000) (450,000)
1 75,000 60,000
2 75,000 60,000
3 100,000 125,000
4 100,000 125,000
5 100,000 125,000
6 140,000 125,000
(i) Calculate the Payback period and the Average Rate of
(ii) Calculate the
(iii) Calculate the
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