our friend is working as a financial manager assistant. He is analysing two mutually exclusive projects of
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our friend is working as a financial manager assistant. He is analysing two mutually exclusive projects of similar size and has prepared the following data. Both projects have 5 year lives.
Project A | Project B | |
Net present value | £15,090 | £14,693 |
Payback period | 2.76 years | 2.51 years |
Average accounting return | 9.3% | 9.6% |
Required return | 8.3% | 8% |
Required AAR | 9% | 9% |
Your friend has been asked for his best recommendation given this information. His recomendation should be to accept:
a. Project A and reject project B based on their net present values
b. project B and reject project A based on their average accounting returns.
c. project B and reject project A based on their payback periods.
Related Book For
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty
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