Company A has three projects (C, D and E) which show positive NPV. But Company does not have enough money to invest in all three projects. So, it decides by the management to know which project increases financial position of the company.

Particulars

Initial investment

Cash inflows (OMR)

1st year

Cash inflows (OMR)

2nd year

Cash inflows (OMR)

3rd year

Risk free rate

Risk premium

Project C

56, 000

25, 000

10, 000

15, 000

2%

5%

Project D

50, 000

32, 000

12, 000

41, 000

2%

4%

Project E

85, 000

12, 000

30, 000

53, 000

3%

7%

Required:

Calculate NPV with risk-adjusted discount rate and give your recommendation to the company management