Question: Branton & Co. Ltd is choosing between two mutually exclusive investment opportunities, Project A and Project B. The estimated cash flows for the two projects

Branton & Co. Ltd is choosing between two mutually exclusive investment opportunities, Project A and Project B. The estimated cash flows for the two projects are as follows:

Project A Project B

£000 £000 Investment (immediate cash outflow) 50 36 Net annual cash inflows:

Year 1 39 28 2 98 3 12 14 Cash inflow from residual value Year 3 7 6 The business’s cost of finance is estimated at 10 per cent.

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