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  • Capital Budgeting

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    kamifarooq
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    Project B has a shorter payback period of 3.75 years compared to Project A's payback period of 4.24 years. Using net present value, Project A has a higher NPV of $407.07 than Project B's NPV of $186.08. Project A also has a higher profitability index of 76.3 compared to Project B's profitability index of 38.22. Based on all three capital budgeting methods, Project A provides better financial returns and I would recommend it to the Company's Management.

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    Project B has a shorter payback period of 3.75 years compared to Project A's payback period of 4.24 years. Using net present value, Project A has a higher NPV of $407.07 than Project B's NPV of $186.08. Project A also has a higher profitability index of 76.3 compared to Project B's profitability index of 38.22. Based on all three capital budgeting methods, Project A provides better financial returns and I would recommend it to the Company's Management.

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    16 views2 pages

    Capital Budgeting

    Uploaded by

    kamifarooq
    Project B has a shorter payback period of 3.75 years compared to Project A's payback period of 4.24 years. Using net present value, Project A has a higher NPV of $407.07 than Project B's NPV of $186.08. Project A also has a higher profitability index of 76.3 compared to Project B's profitability index of 38.22. Based on all three capital budgeting methods, Project A provides better financial returns and I would recommend it to the Company's Management.

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    © All Rights Reserved
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    of 2

    An Assigmnment on

    Capital Budgeting

    Submittedto:
    Submited By:

    Year
    Project A
    Project B
    0
    (1,000)
    (1,000)
    1
    240
    190
    2
    280
    230
    3
    270
    200
    4
    280
    230
    5
    260
    310
    6
    260
    290
    7
    270
    280
    8
    250
    240
    You are retained as a Consultant of the Company. Which of the above projects do you
    recommend to the Companys Management using the following methods of Capital
    Budgeting assuming 10% required rate of return.
    1) Pay Back Period

    3.75
    2) Net Present Value
    407.07
    3) Profitability Index
    EAA 76.3

    NPV 186.08

    IRR 15.1
    Pay back 4.24

    EAA 38.22

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