Question
A company is evaluating two mutually exclusive projects,
A and B, both requiring an initial investment of ₹1,50,00,000. The cost of capital is 10%. The cash flows for each project over 5 years are as follows: • Project A: ₹45,00,000 each year • Project B: ₹20,00,000, ₹40,00,000, ₹60,00,000, ₹50,00,000, ₹40,00,000 Calculate the Net Present Value (NPV) of each project and determine which project should be selected.Solution
Using 10% discount factor: Project A: Annuity of ₹45,00,000 for 5 years → PV = ₹45,00,000 × 3.791 = ₹1,70,59,500 NPV = ₹1,70,59,500 – ₹1,50,00,000 = ₹20,59,500 Project B: Use individual discounting: • Yr 1: 20,00,000 × 0.909 = ₹18,18,000 • Yr 2: 40,00,000 × 0.826 = ₹33,04,000 • Yr 3: 60,00,000 × 0.751 = ₹45,06,000 • Yr 4: 50,00,000 × 0.683 = ₹34,15,000 • Yr 5: 40,00,000 × 0.621 = ₹24,84,000 Total PV = ₹1,55,27,000 → NPV = ₹5,27,000 Hence, Project A is better with higher NPV.
The point on the supply curve at which a firm earns only normal profit is called the ________.
______ is a magnetically thin coated piece of plastic wrapped around wheels which is sequential access and is often used for backing up large amounts of...
Where was the Intercontinental Football Cup 2023 organised?
Which of the following statements is/are correct regarding changes to Atal Pension Yojana Scheme (APY) done in 2022?
A. According to the new cr...
Which state won the title of Santosh Trophy of 2022?
The Teesta treaty has become a bone of contention between India and
Who holds the portfolio of Ministry of Home Affairs (as of July 2023)?
Which of the following is the costume of Sacha ?
Alarmel Valli is an Indian classical dancer and choreographer and a foremost exponent of the __________ dance form of Bharatanatyam.
Appeals and representations are used in_________ communication
