Reference no: EM132969921

A company is considering two alternative investment projects. The estimated net cash flows from each of the projects are given below. The company's cost of capital is 9%.

Year Cash Flow               Alt. 1                 Alt 2
0 Initial

investment                  (900,000)     (1,100,000)
1 Net cash inflow             200,000      100,000
2 Net cash inflow             300,000         200,000
3 Net cash inflow            400,000           400,000
4 Net cash inflow            200,000            600,000
5 Net cash inflow              200,000          500,000

Problem 1: What is the difference, to the nearest whole month, in the payback period for the two alternatives?

Select one:

A. 8 months

B. 3 years 8 months

C. 3 years 0 months

D. 4 years 0 months

Problem 2: What is the net present value of Alternative 2?

Select one:

A. £5,000

B. £1,100,000

C. £218,700

D. £1,318,700