Reference no: EM132582960

Salmal Ltd wants to invest Rs. 1,000,000.00 in an investment project. But they have two alternatives and the net cash flows of the investments plans are as follows.

Year              Project 1 (Rs.)           Project 2 (Rs.)

1                        100,000                    600,000

2                        250,000                   600,000

3                       350,000                  400,000

4                        400,000                  400,000

5                         900,000               (200,000)

Required:

Question i. Pay-Back Period of each project.

Question ii. Net Present Value of each project (Company cost of capital is 12%).

Question iii. Internal Rate of Return of each project

Question iv. Advice the company regarding this investment.

Question v. State 5 qualitative factors which should be considered for taking the capital budgeting decisions.