Question

Q1. Inatech is contemplating two different projects and decides to perform a financial analysis to determine which is more financially lucrative. Project A and B have the cash flows as shown and Inatech uses a required rate of return of 10% and an inflation rate of 4%. Compute the payback in years and the net present value for both projects and offer advice as to the best course of action. (4 marks) Yearl A B 0 -$100.000|-$400,000 $20,000 $75,000 2. $50,000 $100,000 3 $50,000 $150,000 4 $25,000 $150,000 5 $500,000 $750,000 Q2. A project manager is using the payback method to make the final decision on which project to undertake. What is the payback period of a project that has cash flows as shown in the table? What is the rate of return? (3 marks) Cumulative Cash flow Year Cash Outflow Cash Inflow 0 $400,000 1 $75,000 2 $100,000 3 $150,000 4 $150,000 5 $750,000 Q3 Based on the data given in Figure 1 below: i. If you have only limited resources and can only select one project, which one would you select? ii. Among the four projects, which one would be selected last? (3 marks) Criteria: Strategic Risk Market Probability of Weighted Fit Potential Success Total Score Weight: 10 7 5 6 Project 5 3 13 3 Project A 3 4 5 4 Project B 4 13 2 Project C 2 5 3 Project D