Calculate net present value and payback period

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Question - X construction is considering two projects to develop. The estimated net cash flow from each project is as follows:

Year

Project X ($)

Project Y ($)

1

110,000

75,000

2

65,000

150,000

3

100,000

60,000

4

115,000

55,000

5

35,000

60,000

Total

425,000

400,000

Each project requires an investment of $ 200,000. The cost of capital is 10%.

Required -

a) Calculate Net Present Value, Payback period, ARR and Profitability Index.

b) Which Project is to be recommended to develop based on NPV, Profitability Index, Payback period and ARR?

Reference no: EM133164678

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