● A company is confronted with two mutually exclusive projects having the following cash flows:

Proposal A – Initial Outlay `1,00,000; NCF `25,000 for 1st year and `1,25,000 for the 2nd year.

Proposal B – Initial Outlay `1,00,670; NCF `95,000 for 1st year and `45,000 for the 2nd year.

Rank the proposals under NPV and IRR method given cost of capital of 10% p.a.

Discuss with reasons which of the two methods you would rely upon in arriving at your final choice.

The PV Factors Rate 10% 24% 25% 26% 27% 28% 29% 30%

Year 1 0.909 0.806 0.800 0.794 0.787 0.781 0.775 0.769 Year 2 0.826 0.650 0.640 0.630 0.620 0.610 0.601 0.592