Assignment Answers | Investment Analysis Methods: FIN3090

1. Based on the increase in after-tax income, Project B will be the one project April would be attracted to. 2. In the excel file. 3. a. Project D sho …

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1. Based on the increase in after-tax income, Project B will be the one project April would be attracted to. 2. In the excel file. 3. a. Project D should be selected, as ittakes the least amount of time to pay back initial investment. b. Time value of the money is ignored, along with ignoring the amount of profit earned. c. for projects where liquidity is important criteria. 4. a. Project A b. It will ignore the project ’sactual size when comparing the projects. c. It can provide incomplete information in relation to the future. d. Yes, the method would allow investment in all projects except for Project B will be considered for investment since the IRR is below the cost of capital rate. 5. a. Project C. This is based on the present value of the money of the net cashflow during that time period, instead of IRR, which provides the rate at which the project break-even and indicated towards selection of Project A. b. If April had not limited the budget, then the Projects ideal for investment would be Project A, C and D. B is not selected, as the Present Value of the project, even after completion of the 5years would not have been able to repay the original amount ’sprevent value. c. Considering the three investment analysis methods, including IRR, NPV and Payback period, itwould be recommended to choose project A, as itreturns good net value of money on the project, and also has better IRR and pays back the initial amount within the 4thyear. While the return on Project C is also good, the risk associated with the project is also high as the cash flow is unevenly divided, and the project C is only able to repay the initial amount in the last year. IRR is good for project C, but itis lower than Project A.

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