18. A company aims to invest in either of the two projects A and B costing 310,000 and 340,000 each respectively. Project A has a life of 5 years with annual cashflows of $10,000, 320,000, $20,000, 36000 and 34000. Project B expects to have annual cashflows of 340,000, 320,000, 310,000, 36000 and 34000 for each of the five years of it life. If the capitalization rate is 10% p.a. based on the NPV criteria which project should be selected? [PVF - Yr 1-909, Yr 2 - 0.826, Yr 3 - 751, Yr 4-0.683, Yr 5 - 0.621 and Yr 6 -0.564] [10] 19. The earnings before interest and tax of A Ltd is 37,20,000 when its investment in assets is 340,00,000. It has the capacity to raise debt at 12%. (a) If equity capitalisation rate is 18%, calculate the value of the firm and the overall cost of capital if the value of debt is 12,00,000 under Net Income Approach. (b) If equity capitalisation rate is 15%, calculate the value of the firm and the overall cost of capital if the value of debt is 12,00,000 under Net Operating Income Approach. [5+5=10]