Complete the following table using the data in this table. Project A 12% Project
ID: 2757866 • Letter: C
Question
Complete the following table using the data in this table.
Project A 12%
Project B 12%
Project C 12%
0
40000
60000
40000
1
13000
27000
19000
2
13000
25000
16000
3
13000
24000
13000
4
13000
26000
10000
5
13000
20000
7000
Project A
Project B
Project C
Payback rule
Discounted payback rule
Discount rate
Payback
Discounted Payback
NPV
IRR
PI
Accept if independent? Yes / no
Payback
Discounted Payback
NPV
IRR
PI
Best if mutually exclusive (mark yes)
Payback
Discounted Payback
NPV
IRR
PI
Project A 12%
Project B 12%
Project C 12%
0
40000
60000
40000
1
13000
27000
19000
2
13000
25000
16000
3
13000
24000
13000
4
13000
26000
10000
5
13000
20000
7000
Explanation / Answer
Year PV factor @12% PV of Cash flows Project A Project B 12% PV of Cash flows Project B Project C 12% PV of Cash flows Project C Project A 12% 0 1 (40,000) (40,000) (60,000) (60,000) (40,000) (40,000) 1 0.893 13,000 11,607 27,000 24,107 19,000 16,964 2 0.797 13,000 10,364 25,000 19,930 16,000 12,755 3 0.712 13,000 9,253 24,000 17,083 13,000 9,253 4 0.636 13,000 8,262 26,000 16,523 10,000 6,355 5 0.567 13,000 7,377 20,000 11,349 7,000 3,972 Total Cash Inflow PV 46,862 88,992 49,300 NPV 6,862 28,992 9,300 PI= PV of Cash inflows/Investment 1.17 1.48 1.23 Year PV factor @12% PV of Cash flows Project A Project A 12% 0 1 (40,000) (40,000) 1 0.842 13,000 10,950 2 0.709 13,000 9,223 3 0.598 13,000 7,769 4 0.503 13,000 6,544 5 0.424 13,000 5,512 NPV (1) So IRR is 18.72% Year PV factor @30.88% Project B 12% PV of Cash flows Project B 0 1 (60,000) (60,000) 1 0.764 27,000 20,630 2 0.584 25,000 14,595 3 0.446 24,000 10,705 4 0.341 26,000 8,861 5 0.260 20,000 5,208 NPV - (2) So IRR is 30.88% Year PV factor @22.81% Project C 12% PV of Cash flows Project C 0 1 (40,000) (40,000) 1 0.814 19,000 15,471 2 0.663 16,000 10,608 3 0.540 13,000 7,018 4 0.440 10,000 4,396 5 0.358 7,000 2,506 NPV - (0) So IRR is 22.81% - Project A Project B Project C Payback rule Discounted payback rule Discount rate 12% 12% 12% Payback 3.08 2.33 2.3846 Discounted Payback 4.07 2.9345 3.1616 NPV 6,862 28,992 9,300 IRR 18.72% 30.88% 22.81% PI 1.17 1.48 1.23 Accept if independent? Yes / no Payback Discounted Payback Yes Yes Yes NPV Yes Yes Yes IRR Yes Yes Yes PI Yes Yes Yes Best if mutually exclusive (mark yes) Payback yes Discounted Payback No yes No NPV No yes No IRR No yes No PI No yes No