You have been asked to sit on the Ministry’s project selection committee. The following information has been provided; please recommend per category the project to be selected based on the rules stipulated. The Ministry has a payback period rule of  4 years and under. Show all working and state reasons for selection. Payback Period  Project A’s investment is $1,200,000 with an annual net cash inflow of $309,500, Project B’s investment is $500,000 with bi-annual returns of $50,000. Net Present Value (NPV)  Project A’s investment is $11,000,000 with a net cash inflow of $3,895,000 and $8,825,000 for each year, respectively, for two years. Project B’s investment is $5,000,000 with a net cash inflow of $895,000 and $4,798,000 for each year, respectively, for two years. Both project’s discounted rate is 7%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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You have been asked to sit on the Ministry’s project selection committee. The following information has been provided; please recommend per category the project to be selected based on the rules stipulated. The Ministry has a payback period rule of  4 years and under. Show all working and state reasons for selection.

Payback Period 

Project A’s investment is $1,200,000 with an annual net cash inflow of $309,500, Project B’s investment is $500,000 with bi-annual returns of $50,000.

Net Present Value (NPV) 

Project A’s investment is $11,000,000 with a net cash inflow of $3,895,000 and $8,825,000 for each year, respectively, for two years.

Project B’s investment is $5,000,000 with a net cash inflow of $895,000 and $4,798,000 for each year, respectively, for two years.

Both project’s discounted rate is 7%

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