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28 Sep 2019
AST Company is attempting to select among the twomutuallyexclusive projects both of
which cost Rs. 100,000. The firm has a cost of capital equalto13%. After-tax cash
inflows associated with each project are shown in thefollowingtable :
Year ProjectA(Rs.) ProjectB (Rs.)
1 40,000 45,000
2 25,000 25,000
3 35,000 20,000
4 25,000 20,000
5 20,000 20,000
REQUIRED :
(i) Calculate thePaybackPeriod for each project.
(ii) Calculate the Net PresentValue(NPV) of each project.
(iii) Calculate the Internal RateofReturn (IRR) for each project.
(IRR must be calculated by using âTrial &ErrorMethod with Interpolation
Formulaâ. )
(iv) Summarize and compare the abovefindingsfor both projects and indicate which
project you would recommend and why?
AST Company is attempting to select among the twomutuallyexclusive projects both of
which cost Rs. 100,000. The firm has a cost of capital equalto13%. After-tax cash
inflows associated with each project are shown in thefollowingtable :
Year ProjectA(Rs.) ProjectB (Rs.)
1 40,000 45,000
2 25,000 25,000
3 35,000 20,000
4 25,000 20,000
5 20,000 20,000
REQUIRED :
(i) Calculate thePaybackPeriod for each project.
(ii) Calculate the Net PresentValue(NPV) of each project.
(iii) Calculate the Internal RateofReturn (IRR) for each project.
(IRR must be calculated by using âTrial &ErrorMethod with Interpolation
Formulaâ. )
(iv) Summarize and compare the abovefindingsfor both projects and indicate which
project you would recommend and why?
Beverley SmithLv2
28 Sep 2019
