What would you recommend to the organization and why

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Reference no: EM133044747

Problem - NPV exercise - 2 separate and unrelated projects are being considered by an organization. They use Payback period (non-discounted) and NPV as selection criteria.

All projects must pay back within 2 years.

Discount rate is 20%

The following table gives the 20% discount factors and the income / expenditure for the two projects in £000's

Year

Discount Factor

Project A Expenditure

Project A Income

Project B Expenditure

Project B Income

0

1

250

 

300

 

1

.8333

20

100

100

200

2

.694

30

250

50

200

3

.579

50

90

50

150

4

.482

 

 

30

120

5

.402

 

 

30

100

Required -

1. Which of the 2 projects meet the organization's criteria?

2. What would you recommend to the organization and why?

Reference no: EM133044747

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