investment appraisal, Financial Accounting

The business is considering two proposals for their promotions of the professional courses.Proposal one could give a stable return throughout the period. Proposal Two would give higher return only in initial years.


Proposal 1 Proposal - 2
Initial Cost (2,000,000) (2,000,000)
Cash flow Y1 350,000 2,180,000
Y2 800,000 100,000
Y3 900,000 100,000
Y4 750,000 40,000
Y5 200,000 30,000


The Marketing director thinks that the proposal with the highest Net Present Value (NPV) should be chosen where as the sales director thinks that the one with the highest internal rate of Return (IRR) should be undertaken, especially as both proposals have the same initial outlay and length of life. The company anticipates a cost of capital of 10% .
Calculate the following
• Payback period
• Net present Value
• Internal Rate of Return

What are the advantages of each method.
Posted Date: 3/19/2013 9:51:29 AM | Location : Sri Lanka







Related Discussions:- investment appraisal, Assignment Help, Ask Question on investment appraisal, Get Answer, Expert's Help, investment appraisal Discussions

Write discussion on investment appraisal
Your posts are moderated
Related Questions
Absorption costing is a cost accounting method that tries to charge all direct costs and all production costs of an organization to specific units of pr

Q. Net present value evaluation of proposed investment? WORKINGS Fixed costs = 4·50 × 100000 = $450000 per year Annual writing down allowance = 3000000/10 = $300000

Bakers Bagels LLC produces and sells 20 types of bagels by the dozen. Bagels are priced at $6.00 per dozen (or $0.50 each) and cost $.020 per unit to produce. The company is consid

General limitations of Net Present Value when applied to investment appraisal NPV is a generally used technique employed in investment appraisal but is subject to a number of r

As an investor, you are considering buying stock in a relatively new company. Medical Horizons, Inc., has been in existence for 10 years and is now about to go public. The first st

Beginning balance 24,000 cash Sales 250,000 Gross profit 45% of sales Accounts receivable increase by 24,000 Accounts payable increased by 51,000 Inventory increased by 98,000 Sell

liabilities and its types

Q. Which one of the following is not necessary in order for a corporation to pay a cash dividend? a. Adequate cash b. Approval of stockholders c. Declaration of dividends by the bo

Illustration of Corporate tax During the year ended31/12/2003, A Ltd. had estimated the corporation tax for the year to be £100,000. The amount was still outstanding as at 31/1

Define the term Relevance - accounting information Accounting information should have the ability to influence decisions. Except this characteristic is present, there is ac