Question

3. Consider the information in Table 2. Sports Bulletin Plc. is considering investing in two projects, A and B. The initial outlay and annual cash flows are shown in Table 2. Straight-line depreciation method is used. The minimum accounting rate of return is 15%. The discount rate is 10%, and the depreciation rate is 25%. The minimum acceptable pavback period is 3 vears. For each project, the change in net working capital is zero in each vear, Both proiects are of equal-length Table 2 Project A 450,000 Cash Flows (Inflows) 165,000 135,000 180,000 100,000 Project IB 55,000 Cash Flows (Inflows) 12,000 22,000 22,000 26,000 Initial Outlay_> Year 4 (a) Consider Table 2. Calculate project earnings for each year over the lifetime of each project (b) Consider Table 2. Calculate the net present value for each project and rank the projects (c) Consider Table 2. Calculate the accounting rate of return for each project and rank the projects (d) Consider Table 2. Calculate (approximate) the internal rate of return for each project and rank the projects (e) Consider Table 2. Calculate the payback period for each project and rank the projects (f) Assume for now that the firm can invest in a single project only. Which project would you advise the firm to invest in? Explain your answer.

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE