Calculate the net present value of each project

Reference no: EM13330098

Question:

AST Company isattempting to select among the two mutually exclusive projects bothof which cost Rs. 100,000. The firm has a cost of capital equal to13%. After-tax cash inflows associated with each project are shownin the following table :

Years Project A(RS) Project B(RS)

1 40000 45000

2 25000 25000

3 35000 20000

4 25000 20000

5 20000 20000

REQUIRED:

(i) Calculate the Payback Period for each project.

(ii) Calculate the Net Present Value (NPV)of each project.

(iii) Calculate the Internal Rate of Return(IRR) for eachproject. (6+6)

(IRRmust be calculated by using “Trial & Error Method withInterpolation

Formula”.

(iv) Summarize andcompare the above findings for both projects and indicate whichproject you would recommend and why?

Reference no: EM13330098

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