An appraisal from developer of three alternative investment construction project, A, B and C is being...

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An appraisal from developer of three alternative investment construction project, A, B and C is being made and the minimum desirable rate of return is 10% per annum on its invested capital. The details of investment are shown in Table Q3. Table Q3: Investment Data Initial cost Salvage value Net annual income Life Project A RM1,000,000 Nil RM377,000 6 years Project B RM1,700,000 Nil RM622,000 6 years Project C RM3,200,000 RM400,000 RM856,000 7 years (a) Analyse the Net Present Value (NPV) of each investment. Compare the ranking with answer. (b) Analyse the Internal Rate of Return (IRR) of each investment Q3(a). (c) Identify which project is the best to invest with using the IRR method. An appraisal from developer of three alternative investment construction project, A, B and C is being made and the minimum desirable rate of return is 10% per annum on its invested capital. The details of investment are shown in Table Q3. Table Q3: Investment Data Initial cost Salvage value Net annual income Life Project A RM1,000,000 Nil RM377,000 6 years Project B RM1,700,000 Nil RM622,000 6 years Project C RM3,200,000 RM400,000 RM856,000 7 years (a) Analyse the Net Present Value (NPV) of each investment. Compare the ranking with answer. (b) Analyse the Internal Rate of Return (IRR) of each investment Q3(a). (c) Identify which project is the best to invest with using the IRR method.

Answer rating: 100% (QA)

To analyze the Net Present Value NPV and Internal Rate of Return IRR of each investment we need to calculate the present value of the net annual incom... View the full answer