Attempt all the problems.
Section-A
problem1) Describe the concept of time value of money. How do we compute the future value and present value of money in case of an annuity? How does the value of money change with change in rate of interest and time duration? Describe with exs.
problem2) Describe five various types of capital Budgeting Appraisal methods used.
problem3) In relation with financial markets what are the various types of investment risks? How do you measure them?
problem4) What are the different costs considered in the cost of capital? What approaches are used to compute the cost of equity?
Section-B
Case Study
A company is considering the following investment projects. All projects require an investment of Rs. 10,000:
Projects Cash Flow
Year 1 Year 2 Year 3
A 10000 - -
B 7500 7500 -
C 2000 4000 12000
D 10000 3000 3000
Case problems:
problem1) Rank the project according to the following:
(i) Payback period
(ii) Average rate of return
(iii) Internal rate of Return
(iv) Net Present Value; assuming discount rates of 10 % and 30%.
problem2) Assuming that projects are independent which one will you accept?
problem3) In case of the conflict in ranking according to NPV and IRR rule which project you choose and why? Describe with ex.