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18 marksInvestment Appraisal

CAPE Management of Business Unit 1 · 2006 · Paper 2 · Question 5(a)

A company is considering three mutually exclusive investment projects (A, B, and C) with given initial outlays and 5-year expected cash flows, facing an interest rate of 11% p.a.

Compute the Net Present Value (NPV) of each project using a discount rate of 11%.

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Other parts of this question

  1. 5(b)Based on the NPV, determine which project the company should invest in and justify your recommendation.[4 marks]
  2. 5(c)Compare the implication of the NPV of project B and project C.[3 marks]

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