Calculate the net present value of projects A and B, assuming discount rates of 0 per cent, 10 per cent and 20 per cent.
________________________ A (£) _____________ B (£)
Initial outlay ............... 1,200 ................ 1,200
Cash receipts:
Year 1 ...................... 1,000 ................ 100
Year 2 ...................... 500 ................ 600
Year 3 ...................... 100 ................ 1,100
Which is the superior project at each discount rate? Why do they not all produce the same answer?