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  • Inv Appraisal Activity Ans

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    Trần Nghĩa
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    Two projects are being evaluated and compared using several financial metrics. Project 1 has a higher ARR of 18% compared to 14.7% for Project 2, but Project 2 has a higher NPV of $419,455 versus $284,546 for Project 1. While Project 1 has a higher IRR of 25% than Project 2's 20%, Project 2 has a faster payback period of just under 3 years compared to Project 1's payback period of 2 years.

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    Original Title

    Inv Appraisal Activity Ans (1)

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    Two projects are being evaluated and compared using several financial metrics. Project 1 has a higher ARR of 18% compared to 14.7% for Project 2, but Project 2 has a higher NPV of $419,455 versus $284,546 for Project 1. While Project 1 has a higher IRR of 25% than Project 2's 20%, Project 2 has a faster payback period of just under 3 years compared to Project 1's payback period of 2 years.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    16 views2 pages

    Inv Appraisal Activity Ans

    Uploaded by

    Trần Nghĩa
    Two projects are being evaluated and compared using several financial metrics. Project 1 has a higher ARR of 18% compared to 14.7% for Project 2, but Project 2 has a higher NPV of $419,455 versus $284,546 for Project 1. While Project 1 has a higher IRR of 25% than Project 2's 20%, Project 2 has a faster payback period of just under 3 years compared to Project 1's payback period of 2 years.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    of 2

    Proj 1 Proj 2

    £ £
    Year 0 - 1,112,000 - 3,232,000
    Year 1 400,000 1,000,000
    Year 2 400,000 1,000,000
    Year 3 400,000 1,000,000
    Year 4 400,000 1,000,000
    Year 5 (incl scrp vlu) 512,000 1,602,000
    Cost of capital 15%
    Scrap value 112,000 602,000

    ARR
    ARR = Avg annual profit/initial investment
    Ann depn (1112000-112000)/5 (3232000-602000)/5
    200,000 526,000
    Avg annual profit 400000-200000 1000000-526000
    200,000 474,000
    ARR 18.0% 14.7%

    NPV 284,546 419,455

    IRR 25.0% 20.0%

    Payback period
    Proj 1 Proj 2
    Yr CF Cumulative CF Yr
    Year 0 - 1,112,000 - 1,112,000 Year 0
    Year 1 400,000 - 712,000 Year 1
    Year 2 400,000 - 312,000 Year 2
    Year 3 400,000 88,000 Year 3
    Year 4 400,000 Year 4
    Year 5 (incl scrp vlu) 512,000 Year 5 (incl scrp vlu)

    Payback period 2 years 9.36 Payback period


    months
    CF Cumulative CF
    - 3,232,000 - 3,232,000
    1,000,000 - 2,232,000
    1,000,000 - 1,232,000
    1,000,000 - 232,000
    1,000,000 768,000
    1,602,000

    3 years 2.78
    months

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