PROJECT INVESTMENT

Project Investment

Project Investment

Question 1

Payback Period

Project A

Payback period = 2 years 6 months

Project B

Payback period = 2 years 7 months

Project C

Payback period = 3 years 6 months

Accounting Rate of Return

Project A

ARR =

39.29

%

Project B

ARR =

43.75

%

Project C

ARR =

27.68

%

Net Present Value

Project A

NPV =

£19,416.94

IRR =

19.34%

Project B

NPV =

£32,499.54

IRR =

23.23%

Project C

NPV =

(£21,292.53)

IRR =

4.53%

Project Selection

On the basis of the above project evaluation calculation, it is suggested that Project B is most suitable for the investment. The criteria for the project evaluation and selection is low payback period, higher accounting rate of return, higher internal rate of return and ...