Calculate the payback period, ARR, IRR and NPV (at 12%) for two proposed four-year projects, B1...
- Calculate the payback period, ARR, IRR and NPV (at 12%) for two proposed four-year projects, B1 and B2, the cash flows (EBDIT) for which are as follows:
|
Year |
0 |
1 |
2 |
3 |
4 |
|
B1 |
-60,000 |
9,000 |
10,000 |
25,000 |
30,000 |
|
B2 |
-60,000 |
30,000 |
25,000 |
10,000 |
9,000 |
(Assume that straight-line depreciation is applicable and that there is no income tax.)
Why are the NPV and IRR of project B2 superior to B1?
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