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    Solution For Assignment 5 of Financial Management 2: A B A B

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    Yandex Prithu
    This document presents the solution to an assignment on financial management. It contains cash flow information for two projects, A and B, over 5 years. It then calculates the key financial metrics of payback period, accounting rate of return, discounted payback period, net present value, and profitability index for each project. Project A has slightly better financial metrics than Project B based on the calculations shown.

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    Solution For Assignment 5 of Financial Management 2: A B A B

    Uploaded by

    Yandex Prithu
    20 views1 page
    This document presents the solution to an assignment on financial management. It contains cash flow information for two projects, A and B, over 5 years. It then calculates the key financial metrics of payback period, accounting rate of return, discounted payback period, net present value, and profitability index for each project. Project A has slightly better financial metrics than Project B based on the calculations shown.

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    A5 - F2

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    This document presents the solution to an assignment on financial management. It contains cash flow information for two projects, A and B, over 5 years. It then calculates the key financial metrics of payback period, accounting rate of return, discounted payback period, net present value, and profitability index for each project. Project A has slightly better financial metrics than Project B based on the calculations shown.

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    20 views1 page

    Solution For Assignment 5 of Financial Management 2: A B A B

    Uploaded by

    Yandex Prithu
    This document presents the solution to an assignment on financial management. It contains cash flow information for two projects, A and B, over 5 years. It then calculates the key financial metrics of payback period, accounting rate of return, discounted payback period, net present value, and profitability index for each project. Project A has slightly better financial metrics than Project B based on the calculations shown.

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    Solution for Assignment 5 of Financial Management 2

    A B A B
    PV- PV-
    CF Cum. CF CF Cum. CF DF@10% PV- CF PV- CF
    Cum. CF Cum. CF
    Year 1 14,000 14,000 22,000 22,000 0.909 12727 12727 20000 20000
    Year 2 16,000 30,000 20,000 42,000 0.826 13223 25950 16529 36529
    Year 3 18,000 48000 18,000 60000 0.751 13524 39474 13524 50053
    Year 4 20,000 68000 16,000 76000 0.683 13660 53134 10928 60981
    Year 5 25,000 93000 17,000 93000 0.621 15523 68657 10556 71536

    a) PBP for A = 3+ (65000-48000)/ 20000 = 3.85 years or 3 years 10.2 Months

    PBP for B = 3+(70000-60000)/16000 = 3.625 years or 3 years 7.5 months

    b) ARR for A = [93000-65000)/5] / 65000 = 8.62%


    ARR for B = [93000-70000)/5] / 70000 = 6.57%

    c) DPBP for A = 4+(65000-53134)/13660 = 4.87 years or 4 years 10.42 months

    DPBP for B = 4+(70000-60981)/10556 = 4.85 years or 4 years 10.25 months

    d) NPV for A= 68657 - 65000 = 3657

    NPV for B= 71536 - 70000 = 1536

    e) PI for A = 68657 / 65000 = 1.056

    PI for B = 71536 / 70000 = 1.022

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