Project A has an initial investment of Rs. 22 million and projected cash inflows of Rs. 60,00,000 for 5 years.Project B has an initial investment of Rs. 19.5 million and projected cash inflows of Rs. 55,00,000 for 5Assume the discount rate to be 11 percent during Year 1 and thereby increases by 1 percent each year.years.a. Work out the NPV of the two projects and compare the results. Which project should be approved?Why?b. Work out the Undiscounted and Discounted Pay Back Period for the two projects. If the criterion is 5years, which project should be considered based on Discounted PBP?c. Work out the Benefit Cost Ratio (BCR) for the two projects. Which project is acceptable? Why?

NPV is the difference between present value of cash inflows and initial investment NPV =PV of all…

Project A has an initial investment of Rs. 22 million and projected cash inflows of Rs. 60,00,000 for 5 years. Project B has an initial investment of Rs. 19.5 million and projected cash inflows of Rs. 55,00,000 for 5 years. Assume the discount rate to be 11 percent during Year 1 and thereby increases by 1 percent each year. a. Work out the NPV of the two projects and compare the results. Which project should be approved? Why? b. 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? c. Work out the Benefit Cost Ratio (BCR) for the two projects. Which project is acceptable? Why?

Project A has an initial investment of Rs. 22 million and projected cash inflows of Rs. 60,00,000 for 5 years. Project B has an initial investment of Rs. 19.5 million and projected cash inflows of Rs. 55,00,000 for 5 years. Assume the discount rate to be 11 percent during Year 1 and thereby increases by 1 percent each year. a. Work out the NPV of the two projects and compare the results. Which project should be approved? Why? b. 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? c. Work out the Benefit Cost Ratio (BCR) for the two projects. Which project is acceptable? Why?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 1P: A project has an initial cost of 40,000, expected net cash inflows of 9,000 per year for 7 years,...

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