A choice has to be made between two investment proposals. Proposal A requires an immediate outlay of $70000 and a further outlay of $45000 after 3 years. Net returns are $25000 per year for 12 years. The investment has no residual value after 12 years. Proposal B requires outlays of $31000 in each of the first 4 years. Net returns starting in Year 4 are $42000 per year. The residual value of the investment after 12 years is $55000. Which proposal is preferable at 20%? (20 marks)

Answer rating: 100% (QA)

To compare these two investment proposals we need to calculate their net present values NPV at a 20 ... View the full answer