Question
NOTE: SUBJECT BUSIN ESS FINANCE SOLUTION REQUIRED ON THE SAME PAGE PLEASE AND NEED CORRECT SOLUTION Alfa Corporation has identified the following two mutually exclusive
NOTE: SUBJECT BUSINESS FINANCE SOLUTION REQUIRED ON THE SAME PAGE PLEASE AND NEED CORRECT SOLUTION
Alfa Corporation has identified the following two mutually exclusive projects. The CFO of the company wants to evaluate the identified projects. For this purpose he asked Mr. Naveed to evaluate those projects and establish their feasibility with the help of different capital budgeting techniques. Following are the details of the two mutually exclusive projects.
| Period | Project A | Project B |
|
| (Rs.) | (Rs.) |
| 0 | -42,000 | -42,000 |
| 1 | 25,000 | 15,000 |
| 2 | 21,000 | 17,000 |
| 3 | 15,000 | 23,000 |
| 4 | 11,000 | 27,000 |
As per the company policy, Mr. Naveed decided to evaluate both projects with the help of IRR and NPV techniques of capital budgeting.
Requirements:
- What is the IRR for each of these projects? Which project company should accept according to IRR rule?
- What is the NPV for each of these projects? If the required rate of return is 12 percent. Which project company should accept according to NPV rule?
III.If the decision on the basis of NPV is different than that of IRR, which particular criteria company should prefer and why?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
The Oxford Handbook Of Hedge Funds
Authors: Douglas Cumming, Sofia Johan, Geoffrey Wood
1st Edition
0198840950, 978-0198840954
