You are a Financial Analyst for Susan Electronics Company. The Director of Capital Budgeting has asked you to analyze two proposed capital investments Projects P & Q. Each project has a cost of Rs. 10,000 & cost of the capital for each project is 12%. The projects expected net cash flow are as under:-

                                                                                               Expected Net Cash Flow (Rs.)

Year                                                                       Project P                              Project Q

               0                                                                              10,000                                   10,000

               1                                                                                 6,500                     3,500

               2                                                                                 3,000                     3,500

               3                                                                                 3,000                     3,500

               4                                                                                 1,000                     3,500

(i) Calculate each project’s Pay Back Period, Net Present Value (NPV) Internal Rate of Return (IRR).

(ii) Which project or projects should be accepted if they are independent?

(iii) Which project or projects should be accepted if they are mutually exclusive?

(i)            How might a change in cost of capitals produce a conflict between the NPV & IRR rankings of these two projects? Would this conflict exist if k were 5% (HINT:- plot the NPV Profits ).

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Status NEW Posted 08 May 2017 05:05 PM My Price 9.00

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