Q)

X construction is considering two projects to develop. The estimated net cash flow from each project is as follows:

Year Project X ($) Project Y ($)

1 110,000 75,000

2 65,000150,000

3100,00060,000

4 115,00055,000

5 35,00060,000

Total 425,000 400,000

Each project requires an investment of $ 200,000.

The cost of capital is 10%.

Require to

a)Calculate Net Present Value, Payback period, ARR and Profitability Index.

b) Which Project is to be recommended to develop based on NPV, Profitability Index,

Payback period and ARR? Suggest ach project requires an investment of $ 200,000.