| Investment Appraisal - Exercise 3.7 | Unnamed: 1 | Unnamed: 2 | SOLUTION |
|---|---|---|---|
| Project | X | Y | Z |
| Original Equity Investment | 10 | 10 | 10 |
| Cash Inflows from Projects: | |||
| Year 1 | 6 | 4 | 3 |
| Year 2 | 6 | 4 | 5 |
| Year 3 | 6 | 6 | 4 |
| Year 4 | 2 | 10 | 6 |
| Total Cash Inflow | 20 | 24 | 18 |
| Depreciation | 10 | 10 | 10 |
| Profit | 10 | 14 | 8 |
| Average Profit | 2.5 | 3.5 | 2 |
| ARR (based on Original Investment) | 0.25 | 0.35 | 0.2 |
| Under ARR investment Project Y should | |||
| be chosen. |