Question: A business identified two variable mutually exclusive projects. The life of each of the projects is estimated to be 5 years. The salvage of each

A business identified two variable mutually exclusive projects. The life of each of the projects is estimated to be 5 years. The salvage of each of the projects at its life end is negligible. The minimum attractive rate of return is 12%.

Project A1 A2

Initial investment (Rs.) 200,000 280,000

Annual Revenue (Rs.) 75,000 90,000

Salvage value 20,000 25,000

a) Calculate the Net Present Value of each project.

B)Determine which project is more attractive. Give reasons for your answer

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