The expected cash flows of two projects are given below. The cost of capital is 10 per

Question:

The expected cash flows of two projects are given below. The cost of capital is 10 per cent.

(a) Calculate the payback period, net present value, internal rate of return and return on capital employed of each project.
(b) Show the rankings of the projects by each of the four methods and comment on your findings.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...