Business, 17.08.2021 19:10 gymnast5464

Grey Ltd has provided the following figures for two investment projects, only one of which may be chosen. Initial outlay
Profit for year 1 2 3 4
Estimated resale value at end of year 4
Project X Project Y ££ 200,000 180,000
65,000 35,000 65,000 35,000 75,000 65,000 35,000 85,000
60,000 40,000
Profit is calculated after deducting straight line depreciation. The business has a cost of capital of 10%.
a) Calculate for each project
i. Payback
ii. Average Return on Capital Employed
iii. Net present value (NPV)
b) Critically discuss the merits and limitations of payback and NPV (Your answer is to be presented in an essay format NOT Bullet Points)

Answers: 1

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