Net Present Value | ||||
Project A | = | $ 28,238.36 | ||
Project B | = | $ 9,127.36 | ||
Which project should be accepted | = | Project A | ||
IRR | ||||
Project A | = | 20% | ||
Project B | = | 16% | ||
Which project should be accepted | = | Project A | ||
Workings: | ||||
Project A: | ||||
Year | Value Flows | Present Factor @ 6% | Present Value | |
Initial Cost | 0 | $ -1,05,000 | 1 | $ -1,05,000 |
Cash Inflows | 1 - 3 | $ 49,846 | 2.6730 | $ 1,33,238 |
Net Present Value | $ 28,238.36 | |||
Year | Value Flows | |||
0 | $ -1,05,000 | |||
1 | $ 49,846 | |||
2 | $ 49,846 | |||
3 | $ 49,846 | |||
IRR | = | 20% | ||
Project B: | ||||
Year | Value Flows | Present Factor @ 6% | Present Value | |
Initial Cost | 0 | $ -48,000 | 1 | $ -48,000 |
Cash Inflows | 1 - 3 | $ 21,372 | 2.6730 | $ 57,127 |
Net Present Value | $ 9,127.36 | |||
Year | Value Flows | |||
0 | $ -48,000 | |||
1 | $ 21,372 | |||
2 | $ 21,372 | |||
3 | $ 21,372 | |||
IRR | = | 16% |
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