1. a) What is meant by Net Present Value in relation to investment appraisal?
b) The following are net cashflows from three projects, A, B and C, which have an initial investment of £40,000:
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Using investment appraisal methods with which you are familiar, state which of the projects above you would recommend.
Give reason for your answer.
(Marks available: 10)
AnswerAnswer outline and marking scheme for question: 1
Give yourself marks for mentioning any of the points below:
a) Net present value is the present value of future income from an investment project, less the cost.
(5 marks)
b) Payback method. B is fastest.
Return on investment. A is best.
NPV. B is best
B is the best choice.
(5 marks)
(Marks available: 10)