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Determine pay back period and net present value?
A company is considering two projects with the subsequent cash flow streams:
Year
Project A
(Rs.)
Project B
Discount
Factor at 10%
0
1
2
3
4
-2,50,000
10,000
1,00,000
1,20,000
1,30,000
80,000
1.0000
0.9091
0.8264
0.7513
0.6830
Determine if the cost of capital to the firm is 10%, rank the two projects in terms of
(a) pay back period; and (b) net present value.
Which of these criteria will you make use for selecting a project and why?
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