25. A Company can make either of two investments at the beginning of 2010. Assuming a required rate of return of 10% p.a., evaluate the investment proposals under (i) NPV

(ii) Profitability Index. The particulars relating to the projects are given below:

Project I Project II Initial outlay (`) 40,000 56,000 Estimated life (years) 4 5 Scrap value (`) Nil Nil Net Cash Flow (`)
End of 1 11,000 11,200 2 14,000 18,000 3 17,000 18,000 4 15,000 18,000 5 Nil 18,000 It is estimated that each of the alternative proposals will require an additional working capital of `4,000 which will be received back in full after the expiry of each project life.
The present value of `1, to be received at the end of each year, at 10% p.a. is given below:
Year 1 2 3 4 5 P.V. Factor (`) 0.909 0.827 0.751 0.683 0.621