Q.No.3: Assume interest rate of 15.5%. Project A: Costs Rs.1150 immediately and generates Rs.630 for each of the next 5 years. Project B: Costs Rs.1300 immediately and generates Rs.330 in year 1. It generates Rs.350 in year 2 and bears an extra cost Rs.300, and generates Rs.490 in years 3, 4 and 5. Project C: Cost Rs.1500 immediately and generates Rs.200 in year 1, Rs.300 in year 2, Rs.500 in year 3, Rs.600 in year 4 and bear cost Rs.150, Rs.700 in year 5 and bear cost Rs.250. Calculate NPV for above projects & state which one should be accepted or rejected? Either government should consider projects profits or not? Why? (7.5+1.5)
Q.No.3: Assume interest rate of 15.5%. Project A: Costs Rs.1150 immediately and generates Rs.630 for each of the next 5 years. Project B: Costs Rs.1300 immediately and generates Rs.330 in year 1. It generates Rs.350 in year 2 and bears an extra cost Rs.300, and generates Rs.490 in years 3, 4 and 5. Project C: Cost Rs.1500 immediately and generates Rs.200 in year 1, Rs.300 in year 2, Rs.500 in year 3, Rs.600 in year 4 and bear cost Rs.150, Rs.700 in year 5 and bear cost Rs.250. Calculate NPV for above projects & state which one should be accepted or rejected? Either government should consider projects profits or not? Why? (7.5+1.5)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Q.No.3: Assume interest rate of 15.5%.
Project A: Costs Rs.1150 immediately and generates Rs.630 for each of the next 5 years.
Project B: Costs Rs.1300 immediately and generates Rs.330 in year 1. It generates Rs.350 in year 2
and bears an extra cost Rs.300, and generates Rs.490 in years 3, 4 and 5.
Project C: Cost Rs.1500 immediately and generates Rs.200 in year 1, Rs.300 in year 2, Rs.500 in year
3, Rs.600 in year 4 and bear cost Rs.150, Rs.700 in year 5 and bear cost Rs.250.
Calculate NPV for above projects & state which one should be accepted or rejected? Either
government should consider projects profits or not? Why?
(7.5+1.5)
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