You are working as a finance manager for Fire Fox Transport Ltd. The company is considering to invest in one of the two following projects to buy a new equipment for their storage which is expected to...

You are working as a finance manager for Fire Fox Transport Ltd. The company is considering to invest in one of the two following projects to buy a new equipment for their storage which is expected to boost the company’s revenue. Each equipment will last 5 years and have no salvage value at the end. The company’s required rate of return for all investment projects is 9.5%. The cash flows of the projects are provided below.

Required:

1. Identify which option of equipment should the company accept based on Net Present Value (NPV) method?


2. Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 3 years?