A manufacturing unit engaged in the production of automobile parts is considering a proposal of purchasing one of the two plants, details of which are given below:

Particulars	Plant A	Plant B
Cost of the plant	2,000,000	4,000,000
Repair charges (payable at the start of year 4)	400,000	250,000
Life	20 years	15 years
Scrap value at the end of life	400,000	25,000
Output per anum (units)	2,000	4,000

The annual costs of the two plants are as follows:

Particulars	Plant A	Plant B
Selling price per unit	1,500	1,250
Costs per anum:
Wages	100,000	140,000
Materials	480,000	600,000
Repairs	80,000	100,000
Power	240,000	280,000
Other Costs including depreciation	160,000	330,000

1.Will it be advantageous to buy Plant A or Plant B?

2.Using IRR

3.NPV and

Profitability Index method Assume cost of capital is 20%

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