3.

Your company is considering two projects M and N, each of which requires an initial outlay of Rs 50

Million. The expected cash inflows from these projects are

Year

Project M (Mn)

Project N (Mn)

1

11

38

2

19

22

3

32

18

4

37

10

PAPC Assignment + Practice Problems

Prof. Manjunath B R, Bapuji B-Schools, Davangere

a)

If the 2 projects are mutually exclusive and cost of capital is 10%, which project should the firm

invest in?

b)

If the 2 projects are mutually exclusive and cost of capital is 14%, what is the modified IRR of

each project?