Investment Appraisal Assignment

Investment
Appraisal

INVESTMENT 1
TASK
1.
NPV
Project A
4%
Years 0 1 2 3 4 5 6 7 8 9 10
Initial Investment
-
5000
Annual cash flows 700 800 900
100
0
110
0
120
0
130
0 1400 1500 1600
Net cash flows
-
5000 700 800 900
100
0
110
0
120
0
130
0 1400 1500 1600
DCF 1.00 0.96 0.92 0.89 0.85 0.82 0.79 0.76 0.73 0.70 0.68
Present Value of
Cash Flows
-
5000
673.
08
739.
64
800.
10
854.
80
904.
12
948.
38
987.
89
1022
.97
1053
.88
1080
.90
NPV
9065
.76
IRR 11%
Discount Factor 1.00 0.96 0.92 0.89 0.85 0.82 0.79 0.76 0.73 0.70 0.68
Project B
4%
Years 0 1 2 3 4 5 6 7 8 9 10
Initial Investment
-
5000
Annual cash flows 500 0 3000 0 500 2000 0 1000 0 0
Net cash flows
-
5000 500 0 3000 0 500 2000 0 1000 0 0

INVESTMENT 2
DCF 1.00 0.96
0.
92 0.89
0.
85 0.82 0.79
0.
76 0.73
0.
70
0.
68
Present Value of
Cash Flows
-
5000
480.
769 0
2666
.99 0
410.
964
1580
.63 0
730.6
902 0 0
NPV
5870
.04
IRR 4%
Discount Factor 1.00 0.96
0.
92 0.89
0.
85 0.82 0.79
0.
76 0.73
0.
70
0.
68
Payback Period
Project A
Years
Net Cash
Flows CF
0 -5000 -5000
1 700 -4300
2 800 -3500
3 900 -2600
4 1000 -1600
5 1100 -500
6 1200 700
7 1300 2000
8 1400 3400
9 1500 4900
10 1600 6500
6500
Payback
Period 4.58

INVESTMENT 3
Project B
Years
Net Cash
Flows CF
0 -5000 -5000
1 500 -4500
2 0 -4500
3 3000 -1500
4 0 -1500
5 500 -1000
6 2000 1000
7 0 1000
8 1000 2000
9 0 2000
10 0 2000
2000
Payback
Period 4.50
ARR (Average Rate of Return)
Project A
Average Revenue 1150.000
Average
Investment 5000
ARR Average Revenue
Average
Investment