Offshore Services Ltd is an oil-related company providing specialist firefighting and rescue services to oil rigs. The board of directors is considering a number of investment projects to improve the cash flow situation in the face of strong competition from international companies in the same field.

The proposed projects are:

Each project is expected to produce a reduction in cash outflows over the next five years.

The outlays and cash benefits are set out below:

Any project may be postponed indefinitely. Investment capital is limited to £1,000,000. The board wishes to maximise net present value of projects undertaken and requires a return of 10% per annum.

Required

Prepare a report to the board of directors containing:

1. Calculations of net present value for each project, and

2. A reasoned recommendation on maximisation of net present value within the £1,000,000 investment limit.

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Project Description ALPHA Commission an additional firefighting vessel. Replace two existing standby boats. Establish a new survival training course for the staff of client companies. Install latest communications equipment on all vessels. BRAVO CHARLIE DELTA