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Me 5.4 RM
Me 5.4 RM
Me 5.4 RM
Year 1 2 3 4 5
Earnings 2,00,000 2,50,000 1,50,000 1,00,000 75,000
‘A’
Earnings 1,00,000 2,00,000 2,00,000 1,00,000 75,000
‘B’
Solution:
A 1 2, 00,000
2, 00,000 2 years
2 2, 50,000
4, 50,000
3 1, 50,000
6, 00,000 (50,000/1, 50,000)
4 1, 00,000
7, 00,000
5 75,000
7, 75,000
Net
Initial annual life of
Outlay cash project
inflows
A 60,000 18,000 15
B 88,000 15,000 25
C 2150 1,000 5
D 20,500 3000 10
E 4,25,000 1,50,000 20
Rank these proposals according to (i) Payback period (ii) simple average
rate of return. The cost of capital being 6%.
Solution:
Year 1 2 3 4 5 6 7 8 9 10
Net 700 980 10,80 11,10 940 760 570 400 200 200
benefi 0 0 0 0 0 0 0 0 0 0
t
Solution:
Computation of PV of project X
Year Net Benefit Discount Present
factor Value
1 7000 0.9091 6364
2 9800 0.8264 8182
3 10800 0.7513 8114
4 11,100 0.6830 7582
5 9400 0.6209 5836
6 7600 0.5645 4290
7 5700 0.5132 2926
8 4000 0.4665 1866
9 2000 0.4241 848
10 2000 0.3855 772
Gross value
46,780
Solution
5. Determine NPV / pay back from the following data of two machines
A&B
A B
Solution:
Solution:
Year CFBT
1 10,000
2 10,692
3 12,769
4 13,462
5 20,385
Compute NPV at 10% percent discount value.
Solution: