Swan plc. is considering two investment projects whose cash flows are shown below: Points in time (yearly interval) 1 2

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Swan plc. is considering two investment projects whose cash
flows are shown below:
Points in time (yearly interval) 1 2 3 4
Project A (£) -£60,000 £30,000 £22,500 £21,000 £9,000
Project B (£) -£60,000 £7,500 £22,500 £27,500 £30,000
The company’s required rate of return is 15% and two projects
are mututally exclusive.
(a) Use the sample payback method to advise the company which
project should be taken (if any). Assuming the threshold figure is
set to be 3 years.
(b) Use the net present value (NPV) approach to advise the
company which project should be taken (if any).