As a Financial Analyst of Morgan Investments Co., you are going to make a business investment decision on which of the two possible investments the company should undertake. Both projects cost £200,000 with a rate of return of 12%. Below are the cash profits of the two projects:

 Question one:

Using NPV and IRR methods, appraise the two projects and advise the Financial Directors which of the projects is viable and why.  

 

Question two:

Which of the methods is superior? Justify your answer.

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Year 1 2 3 14 5 6 17 Project A 36,000 42,000 56,000 44,000 35,000 32,500 66,000 Project B Profits (£) 37,300 40,000 56,000 51,000 39,650 42,500 80,000 Year 1 2 3 14 5 6 17 Project A 36,000 42,000 56,000 44,000 35,000 32,500 66,000 Project B Profits (£) 37,300 40,000 56,000 51,000 39,650 42,500 80,000