11-11-2004, 09:49 AM
Currently preparing a part time MBA. Financial Accountancy is not my strongest subject, any help is really appreciated.
A company has the following cash flows for 2 mutually exclusive projects concerning acquisition of new plant
Project 1 Project 2
£ £
Cost - Immediate Outlay 200,000 120,000
Expected annual net profit/loss
Year1 58000 36000
Year2 (2000) (4000)
Year3 4000 8000
Estimated Residential value 14000 12000
The net profit figures are after deduction of depreciation on a straight line basis. The cost of capital is 10%.
Question
Identify the net present value and internal rate of Return on each project.
A company has the following cash flows for 2 mutually exclusive projects concerning acquisition of new plant
Project 1 Project 2
£ £
Cost - Immediate Outlay 200,000 120,000
Expected annual net profit/loss
Year1 58000 36000
Year2 (2000) (4000)
Year3 4000 8000
Estimated Residential value 14000 12000
The net profit figures are after deduction of depreciation on a straight line basis. The cost of capital is 10%.
Question
Identify the net present value and internal rate of Return on each project.
