Paramdeep Lotay Centre Number: 52235
Candidate Number: 0320
Investment Appraisal
Project 1
Opening a new location near Bristol - £30,000
Project 2
Purchase two more boats - £30,000
Quantitative Factors for Project 1
After 3 years £6,000 is still needed
In year 4 £8,000 is received
Payback will therefore be:
£6,000 x 12 = 4.5 = 4 years and 4 ½ months
£8,000
The annual rate of return for project 1 would be
£2,000 ÷ 4 = £500
£30,000 ÷ £500 = 60%
Discounted Cash flows
Net Present Value (NPV) = 480 x 100 = 1.6%
