Project atlanta-investment appraisal, Business Economics

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a) $130,000  

b) Project Atlanta has the shorter payback period

Atlanta

Boston

Payback

1 year and 10 months

2 years and 2 months

ARR

7.7%

12.8%

c) Both projects do better than the interest rate so are worth pursuing, but Project Boston has a much better ARR ,however the projects cost the same.

d) This depends on whether the firm's priority was a quick return on the investment (in which case Atlanta would be picked) or if profit were additional of a priority. Although there is a enhanced average rate of return for Boston, much of the money is inward at a later stage in the project's timeline, i.e. it would be worth less in today's value

 


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