When you retire at 65 years old, the bank deposit rate is 5% per annum. A financial advisor recommends the following products to you for your retirement planning to safeguard the value of your asset:

(a) Compute the NPV and IRR for both products A and B

(b) Appraise which product you should choose?

Discuss the strengths and weaknesses of using NPV and IRR in your evaluation of the projects. 

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Annual cashflows Product A B 0 -140,000 -140,000 1 -50, 000 125,000 Years 2 100,000 70,000 3 30,000 120,000 4 50,000 120,000 5 50,000 -300,000 Annual cashflows Product A B 0 -140,000 -140,000 1 -50, 000 125,000 Years 2 100,000 70,000 3 30,000 120,000 4 50,000 120,000 5 50,000 -300,000

Answer rating: 100% (QA)

Anual Cashflows Product 0 Year 1 Year 2 Year 3 Year 4 Year 5 A 140000 50000 100000 30000 50000 50000 B 140000 125000 70000 120000 120000 300000 Questi... View the full answer