Scenario: Suppose you have Rs. 5000 cash with you, and you are looking to invest them. There are three projects available in market with following payback schedule;
Year 1
Year 2
Year 3
Year 4
Year 5
Required Interest
Project A
1500
1000
1500
2000
3000
9% Compounded Quarterly
Project B
3000
2000
1500
1000
500
11% Compounded Quarterly
Project C
25%
20%
30%
35%
40%
6% annual
a. Calculate discounted cash inflows from Project A.
b. Calculate discounted cash inflows from Project B.
c. Project C returns you provided percentage of your actual investment. What is actual amount given to you from project C in each year. What would be discounted value of project C?
d. Which project you would invest in and why?