| Investment Appraisal - Exercise 3.14 | Unnamed: 1 | Unnamed: 2 | Unnamed: 3 | Unnamed: 4 | SOLUTION |
|---|---|---|---|---|---|
| ARR Using the Original Equity Expenditure Method: | |||||
| Average Profit | x 100 | ||||
| Original Equity Expenditure | |||||
| Project | £960 / 4 Years | x 100 | |||
| 600 | |||||
| 0.4 | |||||
| Using the Payback Method: | |||||
| Project | Year | Net Cash Inflows | Cumulative Net Cash Inflows | ||
| 1 | 60 | 60 | |||
| 2 | 240 | 300 | |||
| 3 | 270 | 570 | |||
| 4 | 270 | 840 | |||
| Payback Period = | 3 years + (30 / 270) x 365 days | ||||
| 3 years 41 days |