NPV calculations take into account the time value of money. Diwith brief examples:(i) The time value of money.(ii) The three factors that contribute to the time valuein investment appraisal. Investapp Ltd is considering whether to undertake one of two mutually exclusiveprojects, each of which would require the purchase of an asset costing £50,000,which would have a zero scrap value at the end of four years. Cost of capital isestimated at 10%. The cash flows associated with the two projects are as follows:Project X£Project Y£Initial investment50,00050,000Net cash inflows:Year 140,00030,00020,00020,00030,00020,00030,00030,000Year 2Year 3Year 4Discount factors @ 10%Rate10%Year1.00010.90920.82630.75140.683

Given, The discount rate is 10%

Answered: e) NPV calculations take into account…

e) NPV calculations take into account the time value of money. Di with brief examples: (i) The time value of money. (ii) The three factors that contribute to the time value in investment appraisal.

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...

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