Assignment

3. A company is considering to select a project out of the two mutually exclusive projects. The Company’s cost of capital is 10% and the net after tax cash flow of ht project are as follows.:

Year 0 1 2 3 4 5

Project X (Rs.) 2,00,000 35,000 80,000 90,000 75,000 20,000

Project Y (Rs.) 2,00,000 2,18,000 10,000 10,000 4,000 3,000

(i) Calculate the NPV and IRR of each project.

(ii) State, with reasons, which project you would recommended.

The discount factors are as follows:

Year 0 1 2 3 4 5

Discount Factor

At 10% 1 0.91 0.83 0.75 0.68 0.62

At 20% 1 0.83 0.69 0.58 0.48 0.41