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    UNIT-II-Problems On Capital Budgeting

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    Glyding Flyer
    The document contains 7 problems related to capital budgeting techniques including calculating payback period, accounting rate of return, net present value, profitability index, and internal rate of return for projects with different cash flow structures over multiple years. The problems provide the initial investment amounts and yearly cash flows for projects and ask the reader to apply capital budgeting formulas to analyze and compare the economic viability of the projects.

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    UNIT-II-Problems On Capital Budgeting

    Uploaded by

    Glyding Flyer
    41 views2 pages
    The document contains 7 problems related to capital budgeting techniques including calculating payback period, accounting rate of return, net present value, profitability index, and internal rate of return for projects with different cash flow structures over multiple years. The problems provide the initial investment amounts and yearly cash flows for projects and ask the reader to apply capital budgeting formulas to analyze and compare the economic viability of the projects.

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    UNIT-II-Problems on Capital Budgeting

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    The document contains 7 problems related to capital budgeting techniques including calculating payback period, accounting rate of return, net present value, profitability index, and internal rate of return for projects with different cash flow structures over multiple years. The problems provide the initial investment amounts and yearly cash flows for projects and ask the reader to apply capital budgeting formulas to analyze and compare the economic viability of the projects.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    41 views2 pages

    UNIT-II-Problems On Capital Budgeting

    Uploaded by

    Glyding Flyer
    The document contains 7 problems related to capital budgeting techniques including calculating payback period, accounting rate of return, net present value, profitability index, and internal rate of return for projects with different cash flow structures over multiple years. The problems provide the initial investment amounts and yearly cash flows for projects and ask the reader to apply capital budgeting formulas to analyze and compare the economic viability of the projects.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    UNIT-II

    Problems on Capital Budgeting

    1. Project cost is Rs. 30,000 and the cash inflows are Rs. 10,000, the life of the project is 5
    years. Calculate the pay-back period.
    2. Certain projects require an initial cash outflow of Rs. 25,000. The cash inflows for 6
    years are Rs. 5,000, Rs. 8,000, Rs. 10,000, Rs. 12,000, Rs. 7,000 and Rs. 3,000. Calculate
    the pay-back period.
    3. XYZ Company is considering investing in a project that requires an initial investment of
    100,000 for some machinery. There will be net inflows of 20,000 for the first two years,
    10,000 in years three and four, and 30,000 in year five. Finally, the machine has a salvage
    value of 25,000. Calculate the ARR.
    4. Project X, Expected cash flows are given below calculate PBP, NPV, PI and IRR
    project cost Rs.100000

    Year’s Cash flow

    1 20000
    2 30000
    3 40000
    4 50000
    5 30000
    The cost of capital is 12%.
    5. The investment data of Rajiv Company Ltd. Launching a new product and with 12 per
    cent cost of capital, is as follows:
    Year CFAT
    0 7,00,000
    1 5,00,000
    2 4,00,000
    3 2,00,000
    4 1,00,000
    5 1,00,000
    Determine NPV of the project.
    6. The ranking of projects on the net present value dimension is influenced by the discount
    rate. To illustrate, consider two mutually exclusive projects - A and B which have the
    following cash flow streams :
    Year Project- A Project- B
    0 -3,00,000
    1 60,000 1,30,000
    2 1,00,000 1,00,000
    3 1,20,000 80,000
    4 1,50,000 60,000
    Calculate NPV , PI and IRR with discount rate of 14%.

    7. A company has to select one of the following two projects:

    Year Project-A Project- B


    Cash inflows Cash inflows

    0 22,000 20,000
    1 12,000 2,000
    2 4,000 2,000
    3 2,000 4,000
    4 10,000 20,000

    Using the Net present value and Internal Rate of Return method suggests which is Preferable.

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