| Investment Appraisal - Exercise 3.13 | Unnamed: 1 | Unnamed: 2 | Unnamed: 3 | Unnamed: 4 | SOLUTION |
|---|---|---|---|---|---|
| ARR Using the Original Equity Expenditure Method: | |||||
| Average Profit | x 100 | ||||
| Original Equity Expenditure | |||||
| Project | £28000 / 4 Years | x 100 | |||
| Beta | 50000 | ||||
| 0.14 | |||||
| Using the Payback Method: | |||||
| Project Beta | Year | Net Cash Inflows | Cumulative Net Cash Inflows | ||
| 1 | 16 | 16 | |||
| 2 | 18 | 34 | |||
| 3 | 14 | 48 | |||
| 4 | 14 | 62 | |||
| Payback Period = | 3 years + (2 / 14) x 365 days | ||||
| 3 years 52 days |