| Investment Appraisal - Exercise 3.16 | Unnamed: 1 | Unnamed: 2 | Unnamed: 3 | Unnamed: 4 | SOLUTION |
|---|---|---|---|---|---|
| ARR Using the Original Equity Expenditure Method: | |||||
| Average Profit | x 100 | ||||
| Original Equity Expenditure | |||||
| Project | £15 / 5 Years | x 100 | |||
| 25 | |||||
| 0.12 | |||||
| Using the Payback Method: | |||||
| Project | Year | Net Cash Inflows | Cumulative Net Cash Inflows | ||
| 1 | 8 | 8 | |||
| 2 | 9 | 17 | |||
| 3 | 10 | 27 | |||
| 4 | 6 | 33 | |||
| 5 | 4 | 37 | |||
| Payback Period = | 2 years + (8 / 10) x 365 days | ||||
| 2 years 292 days |