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  • Asessment 2

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    Mr. Oswald wants to know how much he will save by investing Rs. 10,000 annually for 40 years at an interest rate of 8% per year. Tata Tyres is considering two investment projects, Project P and Project Q, with different cash flows over 5 years. They need to calculate the net present value of each project using a cost of capital of 10% and the internal rate of return where the NPV becomes zero.

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    Mr. Oswald wants to know how much he will save by investing Rs. 10,000 annually for 40 years at an interest rate of 8% per year. Tata Tyres is considering two investment projects, Project P and Project Q, with different cash flows over 5 years. They need to calculate the net present value of each project using a cost of capital of 10% and the internal rate of return where the NPV becomes zero.

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    2 views2 pages

    Asessment 2

    Uploaded by

    smitd_3
    Mr. Oswald wants to know how much he will save by investing Rs. 10,000 annually for 40 years at an interest rate of 8% per year. Tata Tyres is considering two investment projects, Project P and Project Q, with different cash flows over 5 years. They need to calculate the net present value of each project using a cost of capital of 10% and the internal rate of return where the NPV becomes zero.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 2

    Question-1 Mr.Oswald wants to invest Rs.

    10,000 per years for next forty years at


    rate of 8% per annum and he wants to know how much he will be able to save at the
    end of 40 years.
    Solution:
    ###

    Question-2 Tata tyres limited is considering two mutually exclusive investments , Project-P and
    Project -Q . The expected cash flows of these projects are as follows :-
    Year Project P Project Q
    0 -1000 -2400
    1 1200 400
    2 600 600
    3 200 800
    4 3000 300
    5 4000 600
    (a) Construct the NPV profile for Pand Q .(COC- 10 %)
    (b) Calculate the rate at which NPV of the projects will become zero.
    Solution:
    NPV for A $7,269.77 $4,438.01
    rate 8%
    year 40
    pmt 10000

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