Inatech Is Contemplating Two Different Projects and Decides to Perform

question 3

Essay

Inatech is contemplating two different projects and decides to perform a financial analysis to determine which is more financially lucrative.Project A and B have the cash flows as shown and Inatech uses a required rate of return of 10% and an inflation rate of 4%.Compute the payback in years and the net present value for both projects and offer advice as to the best course of action. $$\begin{array} { | l | l | l | } \hline \text { Year } & \mathbf { A } & \mathbf { B } \\\hline 0 & - \$ 250,000 & - \$ 400,000 \\\hline 1 & \$ 75,000 & \$ 125,000 \\\hline 2 & \$ 155,000 & \$ 230,000 \\\hline 3 & \$ 200,000 & \$ 288,000 \\\hline 4 & \$ 175,000 & \$ 265,000 \\\hline 5 & \$ 160,000 & \$ 225,000 \\\hline\end{array}$$

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Definitions:

Traditional Management Accounting Systems

Accounting practices that focus primarily on financial information and cost control to aid management in decision-making.

Environmental Costs

Expenses associated with the actual or potential deterioration of natural resources, environmental quality, or public health due to production processes or operations.

Operational Performance Indicator

Metrics or measurements used to assess the efficiency and effectiveness of a company's operations in achieving its objectives.

ISO14031

An international standard that provides guidelines for evaluating environmental performance through the use of environmental performance indicators.