You are an employee of a company called Choices (Pty) Ltd and since the financial manager...

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You are an employee of a company called Choices (Pty) Ltd and since the financial manager knows that you have just passed the financial management module for your qualification, he approached you to help him with the financing decision regarding two projects. He shared the following information for the two projects with you: • Cash inflows: ● ● Year 1 Year 2 Year 3 Year 4 Year 5 Total cash inflows Project A 600 000 650 000 680 000 700 000 710 000 3 340 000 4.1. 4.2. Project B 500 000 520 000 560 000 590 000 640 000 2 810 000 The initial cost for both projects is R1 000 000. The internal rate of return (IRR) is 25% for project A and 7% for project B. The financial manager is of the opinion that the company should invest in project A, as this project generates more cash inflows for the same initial cost. Required: Round off your answers to the nearest rand. Calculate the net present value for each project. (16) Advise the financial manager whether project A is the better project based on your calculations. (4) You are an employee of a company called Choices (Pty) Ltd and since the financial manager knows that you have just passed the financial management module for your qualification, he approached you to help him with the financing decision regarding two projects. He shared the following information for the two projects with you: • Cash inflows: ● ● Year 1 Year 2 Year 3 Year 4 Year 5 Total cash inflows Project A 600 000 650 000 680 000 700 000 710 000 3 340 000 4.1. 4.2. Project B 500 000 520 000 560 000 590 000 640 000 2 810 000 The initial cost for both projects is R1 000 000. The internal rate of return (IRR) is 25% for project A and 7% for project B. The financial manager is of the opinion that the company should invest in project A, as this project generates more cash inflows for the same initial cost. Required: Round off your answers to the nearest rand. Calculate the net present value for each project. (16) Advise the financial manager whether project A is the better project based on your calculations. (4)

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To calculate the net present value NPV for each project we need to discount the cash inflows of each ... View the full answer