The cash flows and NPV calculations for two projects are as follows:
|
Project A |
Project B |
|||
|
(£) |
(£) |
(£) |
(£) |
|
|
Initial cost |
50000 |
50000 |
||
|
Net cash inflows |
||||
|
Year 1 |
10000 |
10000 |
||
|
Year 2 |
20000 |
10000 |
||
|
Year 3 |
20000 |
10000 |
||
|
Year 4 |
20000 |
20000 |
||
|
Year 5 |
10000 |
30000 |
||
|
Year 6 |
30000 |
|||
|
Year 7 |
80000 |
30000 |
140000 |
|
|
NPV at a 10% cost capital |
10500 |
39460 |
||