Q.3 A co. is considering two mutually exclusive projects. Both require an initial cash outlay of...

 

Transcribed Image Text:

Q.3 A co. is considering two mutually exclusive projects. Both require an initial cash outlay of Rs. 10,000 each for machinery and have a life of 5 yrs. The co. required rate of return is 10% and pays tax at net cash flows (before taxes) expects to be generated by the projects are as follows: Year Project 1 Project 2 1 4,000 6,000 2 4,000 3,000 3 4,000 2,000 4 4,000 5,000 5 4,000 5,000 Calculate: a) Payback period b) ARR c) NPV d) PI e) Interpret the results Q.3 A co. is considering two mutually exclusive projects. Both require an initial cash outlay of Rs. 10,000 each for machinery and have a life of 5 yrs. The co. required rate of return is 10% and pays tax at net cash flows (before taxes) expects to be generated by the projects are as follows: Year Project 1 Project 2 1 4,000 6,000 2 4,000 3,000 3 4,000 2,000 4 4,000 5,000 5 4,000 5,000 Calculate: a) Payback period b) ARR c) NPV d) PI e) Interpret the results

Answer rating: 100% (QA)

a Payback Period Project 1 4000 4000 4000 per year 2 years Project 2 6000 3000 2000 6000 per year 15 ... View the full answer