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## Finance

 Basic Finance Corporate Finance Financial Management Financial Econometrics Portfolio Management Risk Management Public Finance Business Law & Ethics

problem: Projects A & B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's cost of capital is 13%. The cash flows for each project are shown in the following table.

 Project A Project B Initial Investment (CF0) Rs. 80,000 Rs. 50,000 Year (t) Cash inflows (CFT) 1 Rs. 15,000 Rs. 15,000 2 20,000 15,000 3 25,000 15,000 4 30,000 15,000 5 15,000 15,000

[A] Compute the internal rate of return [IRR] for each project.

[B] Compute each project's payback period.

[C] Compute the net present value [NPV] for each project.

[D] Draw the net present value profiles for both projects on the same set of axes, and discuss any conflict in ranking that may exist between NPV and IRR.

[E] Summarize the preferences dictated by each measure, and indicate which project you would recommend. describe your answer.

Basic Finance, Finance

• Category:- Basic Finance
• Reference No.:- M917850

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