A firm can invest 10,000 in a project with the life of 3 years.The projected cash inflow are year 1.4000,2.5000,3.

4000
The company has to make a choice between two projects namely A and B.The initial capital outlay of two projects are:Rs13500

Year Project A Project B

1 0 60000
2 30000 84000
3 132000 96000
4 84000 102000
5 84000 90000
6 60000

$16,283.39

Is EPS 0.51% or 0.51 paisa

PE
and
0,2.5000,3.4000
two projects are:Rs135000 and 240000 resp for A and B.There will be no scrap value at the end.The opportunity cost of capital of company
tunity cost of capital of company is 16%.The annual incomes are as under
A limited is considering the question oftaking up a new project which requires an investment of Rs 200 lakhs on machinery and

Year Lakhs
1 80
2 80
3 90
4 90
5 75
The cost of raising the additional capital is 12% and the assest have to be depriciated at 20% on return down value basis.The sc

Year Profit before depreciation and tax Depreciation Profit before tax Profit after tax
1 80 40 40 20
2 80 32 48 24
3 90 25.6 64.4 32.2
4 90 20.48 69.52 34.76
5 75 16.384 58.616 29.308

200 -40 40
160-32 32
128-25.6 2506
Rs 200 lakhs on machinery and others.The project is expected to yield following profits before depreciation and tax over the next 5 years

return down value basis.The scrap value at the end of 5 yrs period may be taken as 0.Income tax applicable to the company is 50%.Calculat

Profit after tax Cash Flow after tax and depreciation Discounting Factor @ 12% Net Cash Flow
60
56
57.8
55.24
45.692
Err:508
n and tax over the next 5 years

e to the company is 50%.Calculate NPV and advise the management whether the project has to be implemented also calculate the interna
mented also calculate the internal rate of return of the project.