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Investment Appraisal Techniques

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In the file attached is the Cash Flow Projection of two proposed projects. Both of these projects involve additions to DMart's highly successful product line and as a result, the required rate of return on both projects has been established at 12 percent.

Please help to:
(a) Briefly explain why the capital-budgeting process is so important to the company.
(b) Calculate the Payback Period & the Net Present Value (NPV) for each of these projects.
(c) State the advantages and disadvantages of using each of the above two methods of project appraisal.
(d) Based on the answers in (b) above, which projects would you recommend to the company, explain giving reasons for your answer.

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(a) Briefly explain why the capital-budgeting process is so important to the company.
Capital budgeting is a process that attempts to predict the future and without it a company could make mistakes that are detrimental to their bottom line. The capital budgeting process is important to a company when attempting to identify which opportunities are available at the time. Once these opportunities ...

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