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Investment Detective

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The Investment Detective 1. Can you rank the project simply by inspecting the cash flow?

1) Project Ranking based on simple inspection of cash flows: | | | | Rank | Project No | Net Cash Flow($) | 1 | 3 | 8000 | 2 | 5 | 2200 | 3 | 8 | 2150 | 4 | 4 | 1561 | 5 | 1 | 1310 | 6 | 7 | 560 | 7 | 6 | 200 | 8 | 2 | 165 |

As per net cash flow priority has been indicated above.
But cash flow does not consider time value of money. So it is not good measure for rank different investment.

2. What criterion might you use to rank the projects? Which quantitative ranking methods are better? Why?

Different quantitative methods are * Net Present Value * Internal rate of return * Payback period * Discounted payback period * Profitability Index
NPV:

IRR:

1) Project Ranking based on IRR: | | | | | Rank | Project No | IRR | 1 | 7 | 15% | 2 | 4 | 12.33% | 3 | 8 | 11.41% | 4 | 3 | 11.33% | 5 | 5 | 11.12% | 6 | 1 | 10.87% | 7 | 6 | 10% | 8 | 2 | 6.31% |
Payback Period: 1) Project Ranking based on Pay Back Period: | | | | Rank | Project No | Pay Back Period | 1 | 6 | 0.91 | 2 | 7 | 1.88 | 3 | 2 | 2 | 4 | 8 | 6.04 | 5 | 4 | 6.05 | 6 | 1 | 6.06 | 7 | 5 | 7.14 | 8 | 3 | 15 |

Discounted Payback Period: Project Ranking based on Discounted Pay Back Period: | | | | | | | | Rank | Project no. | Discounted Pay back period | | | | | 1 | 6 | 1 | | | | | 2 | 7 | 2.73 | | | | | 3 | 8 | 6.84 | | | | | 4 | 1 | 7.84 | | | | | 5 | 4 | 9.1 | | | | | 6 | 5 | 13.16 | | | | | 7 | 3 | 14.83 | | | | | 8 | 2 | - | | | | |

Profitability Index: Project Ranking based on Profitibility Index: | | | | | | | | Rank | Project no. | Profitibility Index | | | | | 1 | 3 | 19.7 | | | | | 2 | 4 | 11.41 | | | | |…...

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