Answer to Question 1 2 Answer to Question 3 8 Answer to Question 4 10 Answer to Question 5 11 References 13 FINANCIAL AND MANAGEMENT ACCOUNTING Financial and Management Accounting Name of the Universi

Running head: FINANCIAL AND MANAGEMENT ACCOUNTING
Financial and Management Accounting
Name of the Student
Name of the University
Author Note

1
FINANCIAL AND MANAGEMENT ACCOUNTING
Table of Contents
Answer to Question 1...................................................................................................................2
Answer to Question 2...................................................................................................................5
Answer to Question 3...................................................................................................................8
Answer to Question 4.................................................................................................................10
Answer to Question 5.................................................................................................................11
References..................................................................................................................................13

2
FINANCIAL AND MANAGEMENT ACCOUNTING
Answer to Question 1
a)
Project X
Particulars Year 0 Year 1 Year
2
Year
3
Year
4
Year 5
Initial Investment -25000
Cash Inflows 5000 5000 5000
Net Cash Flows -25000 5000 5000 5000
Cost of Capital 10%
NPV ($11,423.40
)
Payback Period (in years) 5
In the above case the NPV of the Project X is calculated using the following formula:
NPV = ∑CF/(1+i)^n – Initial Investment.
Where, CF = Annual cash flows, i.e. 5000, I = 0.1 and n = 3.
As the Cash flows are even, the payback period is calculated by dividing the Cash
Outflow with the cash flows. This is calculated to be 5 years.

3
FINANCIAL AND MANAGEMENT ACCOUNTING
Project
Y
Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Initial Investment -25000
Cash Inflows 6000 4000 6000 4600
Net Cash Inflows -25000 6000 4000 6000 4600
Cumulative Cash Flows -25000 -19000 -15000 -9000 -4400
NPV ($7,809.02)
Payback period Greater than 5
years
The NPV of Project Y is calculated in a similar manner. However, as the cash inflows are
uneven, the payback period is calculated with the help of cumulative cash flows. As the
investment is not being recovered in the lifetime of the project, its payback period is more than 5
years.
Project
Z
Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Initial Investment -25000
Cash Inflows 5000 5000 4000 5000 2400