Forums › ACCA Forums › ACCA MA Management Accounting Forums › Need urgent assistance in investment appraisal
- This topic has 3 replies, 3 voices, and was last updated 6 years ago by eugeneyeboah.
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- December 31, 2017 at 1:19 pm #426897
Dear colleagues, anyone can help here with many thanks…
If I have two mutual exclusive projects to study which one a company should invest in (only one at a time), one project has a high NPV but with 3 years Payback and the other with lower NPV but with 2 years payback,the company hasnt specified any payback period limit,which one should i choose…is it the higher NPV or shorter payback..having the same risk.
Best reagrds
A.BadawiDecember 31, 2017 at 5:35 pm #426902If no payback period has been mentioned and there are no other factors mentioned in the question such as need for cash inflow then the project with the higher npv should be picked as this will maximize shareholder wealth.Hope this response helps you.
January 1, 2018 at 12:19 pm #426931Dear mrjonbain, Thank you sir for your assistance.
All the best
A.BadawiJanuary 18, 2018 at 1:35 am #430938I want to whether or not incremental costs are added to initial investment cost figure to be deducted from the discounted cash inflows to arrive at the NPV
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