Question: Solve the below problem. (Please DONOT use CHATGPT else will report to cheggs) You are the Vice president at Majaj Auto ltd which is considering

Solve the below problem. (Please DONOT use CHATGPT else will report to cheggs)

You are the Vice president at Majaj Auto ltd which is considering the following two mutually exclusive projects. All amounts are in INR

Year Cashflow (Project A) Cashflow (Project B)
0 -42,00,000 -60,00,000
1 18,00,000 25,00,000
2 14,00,000 15,00,000
3 12,00,000 12,00,000
4 11,00,000 16,00,000
5 8,00,000 24,00,000

Whichever project we choose, we require a 13 percent return on our investment.

a. If we apply the payback criterion, which investment is to be chosen?

b. If we apply the discounted payback criterion, which investment is to be chosen? why?

c. If we apply the NPV criterion, which investment will be chosen? why?

d. Based on the answers in (a) through (c) which project will be finally chosen? why?

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