BGR Limited is considering a number of plant improvement projects with an allocable fund of `10,00,000. The
Question:
● BGR Limited is considering a number of plant improvement projects with an allocable fund of
`10,00,000. The following projects are under consideration.
Projects Outlay (`) Present Value (`)
A B
C D
E F
6,00,000 5,00,000 4,00,000 3,00,000 2,00,000 50,000 7,25,000 6,00,000 5,00,000 4,00,000 2,75,000 75,000 Projects A and B are mutually exclusive. If project A is undertaken, the initial cost of project C is reduced by `50,000 (without affecting its benefits). If project B is undertaken the initial cost of D is reduced by `50,000 (without affecting the benefits). The benefit cost ratio of unutilised fund is 0.90.
Which projects should be chosen?
Step by Step Answer:
Financial Management
ISBN: 9789352605606
1st Edition
Authors: Swapan Sarkar, Bappaditya Biswas, Samyabrata Das, Ashish Kumar Sana