What is the pp for each contract

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1) Defco Constructions is offered two contracts on the same day for building a new retirement village and a new library complex respectively. The contracts promise total profits of $11 million and $14 million, extending over four years and five years, respectively. Each will require investment of $8 million. On the basis of ARR, which contract is more profitable?

2) Defco Constructions (in exercise 1) recovers its project investment by straight-line methods so that the $10 million is recovered by the end of each project. Assuming profits are also booked in a straight-line fashion, what is the PP for each contract?

Reference no: EM132170226

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