Project A has an initial investment of Rs. 50 million and projected cash inflows of Rs....

  

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Project A has an initial investment of Rs. 50 million and projected cash inflows of Rs. 15 MILLION (each year) for 5 years. Project B has an initial investment of Rs. 80 million and projected cash inflows of Rs. 25 MILLION (each year) for 5 years. Assume the discount rate to be 10 percent. The anticipated inflation rate during Year 1, 2, 3, 4 & 5 is: 2, 3, 4, 3 & 7 percent respectively. a) b) c) Work out the NPV of the two projects and compare the results. Which project should be approved? Why? Work out the Undiscounted and Discounted Pay Back Period for the two projects. If the criterion is 5 years, which project should be considered based on Discounted PBP? Work out the Profitability Index for the two projects. Which project is acceptable? Why? Project A has an initial investment of Rs. 50 million and projected cash inflows of Rs. 15 MILLION (each year) for 5 years. Project B has an initial investment of Rs. 80 million and projected cash inflows of Rs. 25 MILLION (each year) for 5 years. Assume the discount rate to be 10 percent. The anticipated inflation rate during Year 1, 2, 3, 4 & 5 is: 2, 3, 4, 3 & 7 percent respectively. a) b) c) Work out the NPV of the two projects and compare the results. Which project should be approved? Why? Work out the Undiscounted and Discounted Pay Back Period for the two projects. If the criterion is 5 years, which project should be considered based on Discounted PBP? Work out the Profitability Index for the two projects. Which project is acceptable? Why?