B D 2 3 Question 1: COMPARING TWO PROJECTS UNSING NET PRESENT VALUE (NPV) 4 + 5 Project A Interest rate Year 0 Year 1 Year 2 Year 3 Year 5 Year 6 Total 6 Required 15% 7 Outflow ($7,00,000) ($7,00,000) 8 Inflow $2,25,000 $2,25,000 $2,25,000 $2,25,000 $2,25,000 11,25,000.00 9 Net Inflow $2,25,000 $2,25,000 $2,25,000 $2,25,000 $2,25,000 $4,25,000 10 NPV $54,234.90 11 12 13 Project B 14 Required 15% 15 Outflow ($4,00,000) (54,00,000) 16 Inflow $1,10,000 $1,10,000 $1,10,000 $1,10,000 $1,10,000 $5,50,000 17 Net Inflow $1,10,000 $1,10,000 $1,10,000 $1,10,000 $1,10,000 $1,50,000 18 NPV {$31,262.94) 19 Based on the information above, identify which project (Project A or B) should be accepted? Explain why. By changing the figures in the excel template (above), assume the interest rate for Project A fell to 13%, and Cash Questions: Ans outflow (The initial investment) was $950,000, Cash Inflows was $350,000 per annum for the 6 years, and Net inflows was also $250,000. For Project B, assume interest rate also fell to 13% but Cash outflow, Inflow and Net Inflows remain the same. What is the new NPV for each of the project? Would you receommend that any of these 20 21