● M Ltd. has an investment budget of `100 lakhs for 2009–10. It has short listed two projects A and B after completing the market and technical appraisals. The management wants to complete the financial appraisal before making the investment. Further particulars regarding the two projects are given below:

(` lakhs)

Particulars X Y Investment required 100 90 Average annual cash inflow before depreciation and tax (estimate) 28 24 Salvage value: Nil for both projects. Estimate life – 10 years for both projects.

The company follows straight line method of charging depreciation. Its tax rate is 50%.

You are required to calculate the NPV for the 2 projects with a cost of Capital of 13%.

Note: P.V of an annuity of `1 for ten years at different discount rate is given below:

Rate % 10 11 12 13 14 15 Annuity Value of Return 6.1446 5.8992 5.6502 5.462 5.2161 5.01