Goliath Hotel projects the cash flows for three alternative investment projects (in $’000) as:
|
Project |
Year 0 |
1 |
2 |
3 |
4 |
5 |
|
A |
—350 |
100 |
200 |
100 |
100 |
140 |
|
B |
—350 |
40 |
100 |
210 |
260 |
160 |
|
C |
—350 |
200 |
150 |
240 |
40 |
0 |
Depreciation is $70,000 per annum. For each project, calculate the:
- payback period;
- accounting rate of return (average);
- net present value (assuming a cost of capital of 9%); and
- comment on which (if any) project should be accepted.