Writing Reflections

Group Project

FINA 3311 Sec:205

Financial management principles

Faten AlNassar :201302248

Sarah al-Ansari:201300738

Alhanoof Alotaibi: 201201928

	Project A	Project B
Initial outlay	110,000	110,000
Year 1	20,000	40,000
Year 2	30,000	40,000
Year 3	40,000	40,000.
Year 4	50,000	40,000
Year 5	70,000	40,000

Part I -2

Net present value :

Project A:

CFO -110,000

CO1 20,000

F1 1

CO2 30,000 F2 1 CO3 40,000 F3 = 1 CO4 50,000 F4 = 1 CO5 = 70,000 F5 = 1

NPV=31,739.9 (Accept)

IRR= 20.969 (Accept)

PI= = 1.29 PI = 1.29 > 1 Accept​​​​​

Payback Period A:
Year	Project A	Cumulative Cash Flow
0	(110,000)	(110,000)
1	20,000	(90,000)
2	30,000	(60,000)
3	40,000	(20,000)
4	50,000	30,000
5	70,000	100,000
Payback+3=3.4years (reject)

Project B: CFO -110,000 ​​​​​ CO1 = 20,000​​​​​​CO1 = 40,000 F1 5

NPV=34.191.048 (Accept)

IRR=23.919 (Accept)

PI= 1.311 PI = 1.311 > 1 Accept​

Payback period= =2.75 year (Accept )

Only Project B is accepted because it has payback period of less than three years.

Part 3

Mutually Exclusive (Ranking)
	Net Present Value	Internal Rate of Return	Payback Period	Profitability Index
Project A	Second	Second	Second	Second
Project B	First	First	First	First
Decision:	Accept Project B	Accept Project B	Accept Project B	Accept Project B
	Reject Project A	Reject Project A	Reject Project A	Reject Project A

Project B should be accepted and project A should be eliminated because both projects are mutually exclusive. Project B has higher NPV, IRR and PI. Moreover, payback period was 2 years and 7 months, which is less than 3 years.