Rank projects by payback, PW, IRR, B/C

MARR is not given, so 10% per year is assumed for present worth and B/C. Annual cash flows are treated as end-of-year benefits with no salvage value.

Formulas

$$\begin{aligned} \text{Payback} &= \frac{I}{A}\\ PW &= -I + A\,\frac{(1+i)^n - 1}{i(1+i)^n}\\ IRR:\ & PW(i) = 0\\ B/C &= \frac{A\,(P/A, i, n)}{I} \end{aligned}$$

Calculation

Example for item 1: $(P/A,10\%,15) = 7.6061$, so $PW = -60{,}000 + 12{,}000 \times 7.6061 = 31,273$ and $B/C = 1.521$. IRR is found by trial so that $PW = 0$.

Ranking (best first)

Answer: Item 3 is best by payback and IRR and Item 2 is best by present worth and B/C. All four items have PW > 0, IRR > 10% and B/C > 1. Item 2 gives the largest absolute gain; Item 3 is very small in size (Rs 2,150), so present worth is preferred for the final decision (select Item 2 if only one can be taken).