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Hi Mr. Maffot. I’m unable to solve this question. Please help me understand how to solve this question.
Q.) Investment is possible in one or more of three projects – expected life 4 years.
a b c
$ $ $
outlay 10000 7000 1250
expected returns
(t1 – t4)
4000 2500 325
The firm can borrow the finance at 10% pa.Which project(s) should be undertaken?
a.) A only
b.) A and B
c.) A and C
d.) A and B and CIn future you must ask in the Ask the Tutor Forum if you want me to answer. This forum is for students to help each other.
In the absence of any other information, they will invest in all projects that give a positive NPV. Therefore you need to calculate the NPV for each of the projects.
Sorry Mr. Maffot, I thought this was the tutors forum. And i understand the question requires you to calculate the NPV, but i do not understand how to do it. Please explain how to arrive at the answer.
Thanks.I explain how to calculate the present value of an annuity starting at a later date (in this case starting at time 11) in my free lectures on investment appraisal.
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