Comparison of Payback Period and Net Present Value for Business Finance Projects

Business Finance
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK A:.................................................................................................................................3
TASK B................................................................................................................................12
TASK C................................................................................................................................13
TASK 4
Comparison between centralised and decentralised procurement and their benefits. 15
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18
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INTRODUCTION
Finance is important for ever business. Like for human without heart they can’t survive in the
same way finance is the heart of the organisation without which they cannot live. They plays a
vital role for the day the entrepreneur think of establishing the venture till the day they didn’t
stop working. So business finance means the capital that is available to the organisation so that
they can meet their requirement and work on daily basis. With the adequate fund company can
effectively handle their unforeseen event without distracting the operations. With the help of the
business finance they can diversify their activity in different ways (DISEMBER, 2021).
MAIN BODY
TASK A:
a) Pack back period for all projects are as follow:
Discounted payback period=
Year of negative cumulative flow + (negative cumulative cash flow / total discounted flow
Project A:
year Cash flow Present value
PV$1=1/(1+i)n
Discounted
cash flow
Cumulative
discounted
flow
0 -
1,00,00,000
1.000 -1000000 -1000000
1 3,00,000 0.9091 272730 -727270
2 3,00,000 0.8264 247920 -479350
3 3,00,000 0.7513 225390 -253960
4 3,00,000 0.683 204900 -49060
5 3,00,000 0.6209 186270 137210
6 3,00,000 0.5645 169350 306560
The payback period for the project A will lies between 4 to 5 year
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Project A = 4 + (-49060 / 169350)
= 4.24 years.
Project B:
Year Cash
flow
Present value
PV$1=1/(1+i)
n
Discounted
cash flow
Cumulative
discounted
flow
0 -
400000
1 -400000 -400000
1 100000 0.9091 90910 -309090
2 100000 0.8264 82640 -226450
3 100000 0.7513 75130 -151320
4 100000 0.683 68300 -83020
Discounted payback period= cannot be determine because the project end before the income
receive.
Project C:
Year Cash
flow
Present value
PV$1=1/(1+i)
n
Discounted
cash flow
Cumulative
discounted
flow
0 -
700000
1 -700000 -700000
1 200000 0.9091 181820 -518180
2 200000 0.8264 165280 -352900
3 200000 0.7513 150260 -202640
4 200000 0.683 136600 -66040
5 200000 0.6209 124180 58140
Payback period = 4 + (-66040 /124180)
= 4.53
Project D:
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