Payback Period and ARR - Capital Investment Appraisal Techniques - Finance Assignment Help

Assignment Task :

QUESTION 1: 

Capital Investment Appraisal Techniques 

• X construction is considering two projects to develop. The estimated net cash flow from each project is as follows: 
• Project X Project Y Year 1 110,000 75,000 Year 2 65,000 150,000 Year 3 100,000 60,000 Year 4 115,000 55,000 Year 5 35,000 60,000 
• Project requires an investment of $200,000. A rate of 15% has been selected for the NPV analysis. 

Requires to 

a) Calculate Payback period, ARR, Net Present Value and Profitability Index

b) Which Project is to be recommended to develop based on NPV, Profitability Index, Payback period and ARR?

QUESTION 2: 

A. In learning about ratios, we could simply study the different types or categories of ratios, or we could use ratios to answer some important questions about a firm's operations. We prefer the latter approach and have chosen the following four questions as a map in using financial ratios: 

1. How liquid is the firm? 

2. Is management generating adequate operating profits on the firm's assets? 

3. How is the firm financing its assets? 

4. Are the owners (stockholders) receiving an adequate return on their investment?

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