(a)[10]
Calculate the net present value (NPV) for each option.
(b)[2]
Advise the directors on which option they should select. Justify your answer.
(c)[3]
Calculate, to two decimal places, the sensitivity of the option you chose in part (b) to changes in the project’s initial cost.
(d)[6]
Calculate, to two decimal places, the accounting rate of return (ARR) of the option you selected in part (b). (When finding average investment, add scrap value to cost.)
(e)[4]
Explain to the directors which investment appraisal method is the more valid. Give reasons.