Assignment2.docx

# Project a year project a calculation for payback

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Project A Year Project A Calculation for payback Period 0 -210 000 -210 000 1 27 000 (-210 000) + 27 000 = - 183 000 2 35 000 (-183 000) + 35 000 = - 145 000 3 33 500 (-145 000) + 33 500 = - 114 500 4 15 000 (-114 500) + 15 000 = - 99 500 5 58 200 (-99 500) + 58 200 = - 41 300 6 45 000 (-41 300) + 45 000 = 3700 (5 + (41 300 / 45 000) = 5.9 years The Payback Period for this project is 5.9 years Project B Year Project B Calculation for payback Period 0 -350 000 -250 000 1 100 000 (-350 000) + 100 000 = - 250 000 2 50 000 (-250 000) + 50 000 = - 200 000 3 100 000 (-200 000) + 100 000 = - 100 000 4 120 000 (-100 000) + 120 000 = 20 000 5 5 000 (20 000) + 5 000 = - 25 000 6 15 000 (25 000) + 15 000 = 40 000 (3 + (100 00 / 120 000) = 3.8 years The Payback Period for this project is 3.8 years 2.6 Calculate the Net Present Value for each project. Project A: Year Project A Discount Factor @ 12% Discount Cash Flow 0 -210 000 1 -210 000 1 27 000 0.8929 24108.3 2 35 000 0.7972 27902 3 33 500 0.7118 23845.3

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4 15 000 0.6355 9532.5 5 58 200 0.5674 33022.68 6 45 000 0.5066 22797 NPV -68 792 Project B: Year Project B Discount Factor @ 12% Discount Cash Flow 0 -350 000 1 -350 000 1 100 000 0.8929 89 290 2 50 000 0.7972 39 860 3 100 000 0.7118 71 180 4 120 000 0.6355 76 260 5 5 000 0.5674 2 837 6 15 000 0.5066 7 599 NPV -62 974
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