1. For a business firm leverage is about the fixed operating cost and the fixed finance costs in the cost structure of the firm.

For the given details, identify for which firm the degree of operating leverage and degree of financial leverage are higher and why so:

Firms	Amrit	Baayu
Sales (Rs.) Variable cost p.u Fixed cost (Rs.) Output (units) Interest	3,60,000 20 72,000 6,000 40,000	7,50,000 150 1,40,000 1,500 80,000

2.

Project costs Rs 180,000 and is expected to generate cash inflows as:

Year	Cash inflows(Rs)
1	20,000
2	24,000
3	30,000
4	36,000
5	40,000

1. Discuss the characteristics of long term capital budgeting decisions
2. calculate the Net Present Value of the project if the cost of capital is 12% and conclude.