Question: AST Company is attempting to select among the two mutuallyexclusive pr

Question

Question:

AST Company is attempting to select among the two mutuallyexclusive projects both of

which cost Rs. 100,000. The firm has a cost of capital equal to13%. After-tax cash

inflows associated with each project are shown in the followingtable :

Year       Project A(Rs.)          ProjectB (Rs.)

1             40,000                      45,000

2             25,000                        25,000

3             35,000                       20,000

4             25,000                        20,000

5             20,000                        20,000

REQUIRED :

(i) Calculate the PaybackPeriod for each project.

(ii) Calculate the Net Present Value(NPV) of each project.

(iii) Calculate the Internal Rate ofReturn (IRR) for each project.

(IRR must be calculated by using “Trial &Error Method with Interpolation)

(iv) Summarize and compare the above findingsfor both projects and indicate which

Explanation / Answer

I have answered this question already here: NPV, IRR, etc.. This is completely solved! :)

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