ACCCB Competency 1
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ACCCB/543 Competency 1 Assessment Course Title: Managerial Accounting and Legal Aspects of Business Competency Assessment Title: Net Present and Internal Rate of Return
The Net Present Value
The net present value of each project
NPV = [cash flow / (1+i) ^t] - initial investment
NPV. A= ($126,000/ (1+0.8) ^4)-$400,000 = $17,327.98
NPV. B = ($52,800/ (1+0.8) ^4)-$160,000
= $14,880.30
These two positive NPV implies that the Income generated by both investment exceeds the costs of the projects. Meaning that the projected earnings generated by both projects—
discounted for their present value—exceed the anticipated costs in today's dollars.
NPV For Project A
Project A
Initial Investment
-400000
Year 1
126000
$
$116,666.67
Year 2
126000
$108,024.69
Year 3
126000
$100,022.86
Year 4
126000
$92,613.76
Discount Rate
8%
NPV
$417,327.98
NPV For Project B
Project B
Initial Investment
-160000
year 1
52800
$48,888.89
year 2
52800
$45,267.49
year 3
52800
$41,914.34
year 4
52800
$38,809.58
Rate
8%
NPV
$174,880.30
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