capital budgeting questions and answer.pdf

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1. lstration 41
ICLId
hasdecided to pur hase a
nmachine to
augment the
mman 's installedcapacitv to meet the growing demand for
iNducts, There are three machines
underconsideration
of hc management. The relevant details including estimated
Cypenditure. and sales are given below: All sales are on
Coporate Income Tax rate is 30%.
erigl innetment rQuiny!
Extinato Annual sals
Drn Materzals
Drn Lahour
Eo Oerheads
Administration costs
calhrns antd
istribution costs
Solution :
tTal veStment (A)
Saies (B)
Costs
Direct Material
Direct Labour
Factorv Overhead
Depreciation
Administration Cost
Selling and Distribution costs.
Total Cost (C)
Profit before Tax (B-C)
Les: Tax a 30%
Profit after Tax
Add Depreciation
Machine1
300000
5,00.000
llustration 4.2
CH. 4:
CAPITAL
BUDGETING TECHNIOUES OF EVALUATION
40,000
50.000
louation of Pay Back Period of Machines :
60,000
20,000
10,000
The eononmic life of FMachine l is 2 years, while it is 3 years for
the other two. The scrap values are 40,000, 25,000, and
F30.000 respectivelv. You are required to find out the most
profitable: investment based on Pay Back Method'.
Machine 1
73,00,000
5,00,000
40,000
50,000
60,000
1,30,000
20,000
10,000
3,10,000
1,90,000
57,000
1,33,000
1,30,000
Machtne 2
2,63,000
1.14
R3,00,000
4,00,000
50,000
30,000
50,000
10,000
10,000
3,00,000
4,00,000
50,000
30,000
50,000
91,667
10,000
Machine 2 Machine
10,000
2,41,667
1,58,333
47,500
Machine 3
1,10,833
R3,00,000
91,667
2,02,500
1.48
4,50,000
48,000
36,000
58,000
15,000
10,000
73,00,000
4,50,000
48,000
36,000
58,000
90,000
15,000
10,000
2,57,000
1,93,000
57,900
1.35,100
90,000
Net Cash flow (D)
Pay back period (years) (A+D)
lachine I has lowest pay back period, so it may be preferred
wer the other two Machines.
2,25,100
1.33
-12 Ltd. has to replace one of its machine for which it has
blowing options:
Installation of equipment "Best" having cost of ? 75,000
Wnch is expected to a generate a cash inflow ofR 20,000
per annum for next 6 years.
nstallation of equipment "Better" having cost ofR50,000
Wich is expected to generate a cash inflow of ? 18,000
per annum for next 4 years.
Which equipment should be preferred if the company
adopts method of () Pavback period (ii) Internal Rate of
Return.
Sobution
Payback Perlod:
Payback period of equiprnent "Best" is:
75,000 20,000-3.75 years
Internal Rate of Return Method :
Equipment "Best":
Payback period of equipment Better is:
R 50,000 + 18,000=2.78 years
So, equipment "Better', having lower payback period of
2.78 years may be preferred.
=7 20,000 per year for 6 years.
=3.75
PVAF,
=275,000/20,000
In the PVAF Table., the values nearest to 3.75 in the 6 year row
are foundin 15%(3.784) and 16% (3.685) column. Now, the IRR
may be found by interpolating between 15% and 16% as
follows:
Initial outlay = 75,000
2
Inflows
Equipment "Better":
3
(,.6)
5
GRADED ILLUSTRATIONS
Inflows
Initial outlay = 50,000
PVAF.
Illustration 4.3
= 15% +
Year (at end)
In the PVAF Table, the values nearest to 2.778 in the 4 yearrow
are found in 16% (2.798) and 179% (2.743) column. Now, the IRR
may be found by interpolating between 16% and 17% as
follows :
3.784 -3.750
3.784 -3.685
= Rs 18,000 per year for4 years
=2.778
=50,000/18,000
= 16%+
The equipment "Better", having IRR of 16.36% may be pre
ferred over the equipment "Best".
2.798-2.778
2.798 -2.743
Machine A costs 1,00,000 payable immediately. Machine B
costs 1,20,000 half payable immediately and half payable in
one year's time. The cash receipts expected are as follows:
Machine A
7 20,000
79
X1= 15.34%
60,000
40,000
30,000
20,000
-X1=16.36%
MachineB
60,000
60,000
80,000
At 7% opportunity cost, which machine should be selected on
the basis of NPV?

2. 80
Soution :
1.Calculation of NPV
TeRr
NPV
1
2
Year
3
4
Year 1
Cash flows PVF
3
L00.000
Mustration 4.4
4
Solution:
20.000
5
60.000
Capital outlay
Depreciation
40.000
Machine A
30 000
20.000
(a) Payback method.
Rate of Return
1.000
935
.873
Income (3)
1,00,000
816
1,00,000
.763
.713
80,000
80,000
PART I: LONG-TERM INVESTMENT DECISIONS: CAPITAL BUDGETING
Machine B
PVO Cash flows PVE.
-1.00,000
(b) Rate of return on original investment.
40,000
Machine B is having higher: NPV and may be selected.
.18,700
(b) Rate of return on
original investment:
52.380
32,640
22,890
14,260
40,870
A company is considering a new project for which the invest
ment data are as follows:
Forecasted annual income before charging depreciation, but
after all other charges are as follows:
-R60.000
40,000
40,000
72,00,000
-60,000
On the basis of the available data, set out
calculations, illus
trating and comparing the following methods of evaluating the return:
40,000
40,000
60,000
40,000
60,000
40,000
Average Income =2,00,000/5 =40,.000
Since there is no tax, the annual income before depreciation and after other charges is
equivalent to Cash flows (CF). (a) Capital outlay of
2,00,000 is recovered in the first two years, (R 1,00,000 (year 1) + Rs 1,00,000 (year 2), therefore, the
pay-back period is two years.
Average income
Original investment
(7n)
1.000
.935
.873
.816
X 100
80,000 .763 61,040
X 100= 20%
Depreciation () Net income ()
PVE)
-60,000
72,00,000
20% p.a.
-56, 100
52,380
48,960
71,00,000
1,00,000
46,280
80,000
80,000
40,000
4,00,000
60,000
60,000
40,000
40,000
2,00,000
1
2
Ilustration 4.5
A company has to consider the following Project:
2
3
Cost
Solution:
3
4
4
Cash inflows:
5
Year 1
Cost
2
3
4
Compute the internal rate of return and comment on the
project if the opportunity cost is 14%.
Internal Rate of Return:
Cash Inflows
Year
Year Cash inflows
7 1,000
=10,000
In the PVAF table, value near to 2.857 for 4 years is found in
15%. However, as the cash inflows in the earlier years are
lower, the NPV may be found at 10% and 11% as follows :
Calculation of IRR:
Approximate Pay-back period = 10,000
IRR == 10% +
=1000,1000, 2000, 10,000
=73500
Total PV of Inflows
NPV of the Proposal
Illustration 4.6
Average Inflow = 1000 + 1000 + 2000 + 10,000) 4
10,000
1,000
2,000
PVE,
(10%n)
.909
.826
.751
.683
67
67-(-235)
=
10%+.22 = 10.22%
[B. Com. (H.), D.U. 2009)
PVO) |PVEsn)
909
826
1,502
6,830
10,067
67
X (11-10)
Project A
? 1,00,000
32,000
32,000
Z10,000
32,000
71,000
.901
IRR may be found by
interpolation between 10% and 11% as follows:
32,000
1,000
.812
2,000
3500 = 2.857.
.731
32,000
10,000
.659
As the
opportunity cost of the firm is 14%, the project having
IRR of 10.22% should be
rejected.
XYZ Ltd. is
considering twO additional mutually exclusive projects. The after-tax cash flows associated with these projects
are as follows:
PV )
901
812
1,462
6,590
9,765
-235
Project B
7 1,00,000
0
Rs. 2,00,000
The
required rate of return on these projects is 11% : (a) What is each project's net
present value?
0

3. ih What is cach projet's internal rate of retum?
i What has caused the ranking conflict?
Whirh projcct should be accepted? Why?
Solution:
Calculation of NPV:
Project A:
Annual lnflow
PLAE:
P' of nflows
Cost
Less Outtlow
Net Present Value
Project B:
Inflow after Sth year
PVI 15
PV of lnflow
Less: Outflow
Net Present Value
Calculation of Internal Rate of Return:
Project A:
NPV @ 18% [(32000 >X 3.127) 1,00,000]
NPV @ 19% [(32000 >X 3.058) -1,00,000]
Interpolation:
RR= 18% +
Project B:
IRR = 14% +
64
64-(-2144)
NPV @ 144% [(2,00,000 X .519) 1,00,000]
NPV @ 15% [(2,00,000X 497) -1,00,000]
Interpolation :
Difference in Ranking:
Illustration 4.7
3800
3800 -(-600)
Cash inflows
CH. 4:CAPITAL BUDGETING-TECHNIOUES OF EVALUATION
Year
0
1
2
3
4
X1=18.03%
5
14.46%
|BCom. (H), DU, 2012]
Project X
According to NPV mnethod, Project B is better which the IRR
method suggests for Project A. Difference in ranking of
projects arises because of difference in patterns of inflows.
However, Project A should be accepted. The reason being that
the NPV of two projects are not much different but IRR of
Project A is definitely higher than that B.
? 1,00,000
10,000
A firm whose cost of capital is 10% is considering two mutually
exclusive projects X and Y, the details of which are :
20,000
30,000
45,000
32,000
60,000
3.696
R1,18,272
1,00,000
718,272
2,00,000
.593
1,18,600
1,00,000
718,600
-2,144
3,800
-600
Project Y
R 1,00,000
50,000
64
40,000
20,000
10,000
10,000
Compute the Net Present Value at 10%, Profitability Index,
and Internal Rate of Return for the two projects,
[BCom.(I), DO, 2012)
Solutton:
Calculatlon of NPV:
Year
4
5
Total P
NPV
Less cash outflow
Project X
Project X
Project X
Payback value
Year
Calculation of IRR:
1
2
PI= (PV of Inflows/PV of Outflows)
3
4
5
Project Y
10,000
Year
20,000
2
30,000
3
45,000
4
60,000
5
CFC)
10,000
20,000
The PVAF table indicates that for Project X, the PV Factor
closest to 3.030 against 5 years is 3.058 at 19% and for Project
Y, the PV factor closest to 3,846 is 3.890 at 9%. In the case of
Project X, since CF in the initial years are considerably smaller
than the average cash flows, the IRR is likely to be much
smaller than 19%. In the case of Project Y, CF in the initial
years are considerably larger than the average cash flows, the
IRR is likely to be much higher than 9%. So, Project X may be
tried at 14% and 15% and the Project Y may be tried at 13% and
14%.
30,000
X
45,000
60,000
CF(?)
50,000
40,000
CF ()
20,000
10,000
50,000 0.909
40,000 0.826
10,000
20,000 0.751
10,000 0.683
10,000 0.621
Initial cash outlays
Average cash inflows
71,00,000
733,000
71,00,000
PV Factors
14% 15%
0.769
0.675
0.592
0.519
26,000
0.783
0.693
0.756
0.613
0.658
PV Factors
13%
0.543
0.572
14%
0.885 0.877
0.497
0.769
By interpolation between 14% and 15%, the IRR comes to
14.71%.
0.675
9,090 45,450
16,520 33,040
22,530 15,020
30,735 6,830
37,260 6,210
1,16,1351,06,550
1,00,000 1,00,000
16,135 6,550
0.592
Total PV ()
0.519
1.161 1.065
=3.030
=3.846
Total PV)
14%
8,770
20,250
26,640
15,380 15,120
31,140
81
1,02,1 80
44,250
31,320
13,860
6,130
15%
5,430
8,700
1,00,990
Total PV)
13% 14%
19,740
25,740
29,820
99,120
43,850
30,760
13,500
5,920
5,190
99,220
0.877 0.870

4. 1
4
5
6
82
9
rized as follows:
By
intterpolation between 13% and 14%, the IRR comes to 13.56%. The results of the above calculations may
be summa-
Solution:
NPV
PI
IRR
lustration 4.8
(i) Payback Period :
7
Year
Year
2
Cashflows for 5 years
Balance outlay
3
10
Net cash Row 7,000 7,000 7,000
Cashflow for year 6
1
Initial outlay
Year
A company requires an initial investment of 40,000. The estimated net cash flow are as follows:
Solution:
Using 10% as the cost of capital (rate of discount), determine the following :
() Pav-back period (i) Net Present Value and (iü) Internal Rate of Return.
3
Therefore, Payback period =5years +
(iü) Net Present Value (at 10% of cost of capital)
Cashflow
7,000
7,000
7,000
7,000
7,000
8,000
10,000
Project X
R 16,135
15,000
Calculation of NPV @20% :
PART I|: LONG-TERM INVESTMENT DECISIONS: CAPITAL BUDGETING
10,000
4,000
Total inflows
1.161
14.714%
Less Initial outlay
Net Present Value
4
7,000 7,000 8,000 10,000 15,000 10,000 4,000
40,000
6
PBDep.
? 1,00,000
7,000 +7,000 + 7,000 + 7,000
+7,000 =735,000
=40,000 -35,000 = 5,000
=78,000
1,20,000
1,20,000
1,20,000
60,000
60,000
PVF 10%n)
5,000
8,000
.909
.826
.751
7
.683
.621
.564
.513
.467
.424
386
Dep.
Project Y
?6,550
1.065
66,667
13.56%
44,445
29,630
(Figures in )
19,753
13,169
8,779
=5.62 years.
PV
6,363
5,782
5,257
4,781
4,347
4,512
5,130
7,005
10
4,240
1,544
48,961
40,000
8,961
PBT
733,337
75,555
90,370
1,00,247
46,831
51,221
find out IRR, the cash flows may now be
discounted al
say
The NPVat 10% has been found to be Rs 8,961.
.So, in n
order
(1) Internal Rate of Return (IRR)
14% and 15%, as follows:
Year
2
3
5
6
7
8
10
Cashflows
lustration 4.9
PAT
Z7000
7,000
7 23,336
7,000
Less Initial outlay
52,888
7,000
Net Present Value
63,259
70,173
7,000
32,782
8,000
4,000
Total inflows
35,855
10,000
15,000
IRR == 14% +
10.000
PVF
CF
90,003
(145,)
97,333
.877
92,889
.769
89,926
.675
45,951
.592
44,634
519
456
400
.351
308
.270
PV
Z6.139
5,383
4,725
4,144
3,633
3,648
4,000
At 14% NPV is 1097, and At 15% NPV is -580
1,097
1,097 -(-580)
= 14% +.65 = 14.65%
5,265
3,080
1,080
41,097
40,000
1,097
The IRR may be found by interpolating between 14% and 154
as follows:
XYZ Ltd. is considering the introduction of a new product. If
is estimated that profits before depreciation would increase by ? 1,20,000 each year for first four years and 60,000 each for the remaining period. An
advertisement cost of 20,000 is
expected to be incurred in the first year, which is not included in the above estimate of profits. The cost will be allowed for
tax purpose in the first year.
PVF
A new plant costing? 2,00,000 will be installed for the produc tion of the new product. The salvage value of the plant after its life of 10 years is estimated to be 40,000. Aworking capital investment of ? 20,000 will be required in the year of installing the plant and a further 15,000 in the following year. The
company's tax rate is 30% and it claims written down value
depreciation at 33.33%. If the company's required rate o return is 20%, should the company introduce the new prod uct? Ignore tax effect on Profit/Loss on sale of asset.
(20%,n)
.833
.694
PVia)
.579
870
482
.756
.402
658
572
.335
497
432
376
326
.284
247
6,990
5292
466
4,004
3479
3,456
3,760
4,905
2340
988
39420
40,000
-580
PV
PV
Z74,972
67,549
53,783
43,344
18,472
14952

5. Year
ear:)
Present V'alue of Outflows :
Initial outflow
PRDep.
Working Capital released
Serap Value of the plant
Present Valne of Inflows
CH 4 CAPITAL BUDGETING. TECHNIQUEs OF EVALUATION
60,000
Working Capital Required at T
-R90,181
lustration 4.10
60,000
60,000
NP =PV of Inflows -PV of OutfloWs
Investment Cost
Estimated Income
60,000
Year
-3,22,676-2,32,495
Solution :
2
Note: Profit for the vear l has been taken asL,00,000 Le.,
R1.20000 20,000. The amount of
advertisement expenses ol
20000has beeccn deducted to find out net cash inflow forthat
Working Capital required at T, ( 15,000×.833)
Year 1
Year 2
Year 3
ProposalA
79,500
Cash inflows (?)
A
The proposal has a positive NPV and hence may be accept
able.
4,000
Bright Matels Ltd. is considering two different investment
proposals, A and B. The details are as under:
4,000
PVE
4,500
Dep.
S,853
3,902
(12% a)
2,601
L734
1.000
0.893
0.797
0.712
Proposal B
Suggest the most attractive proposal on the basis of the NPV
method considering that the future incomes are discounted
at 12%. Also find out the IRR of the two proposals.
A
-9,500
Evaluation of Investment Proposal (Net Present Value
Method):
3,572
3,188
R 2,00,000
20,000
3,204
12,495
20,000
464
2,32,495
8,000
Present Value (3)
8,000
PIT
12,000
54,147
-9,500 -20,000
4,000 8,000
4,000 8,000
4,500 12,000
Net Present Value (NPV)
NPV is more in Proposal B and therefore, it should be ac
56,(098
57.399
58,266
-20,000
7,144
6,376
8,544
2,064
Calculation of Internal Rate of Return: In case of Proposal A,
the discount factor should be raised from 12% and tested at,
say, 14% and 15%. Similarly, forB the same should be tried at,
say, 17% and 18%. The purpose is to find out at what point the
present value of inflows are equal to 9,500 and 20,000.
Project A
PAT
NPV @ 12% 464
37,903
NPV @ 14% 122
19,269
NPV o 15%-35
40,179
Year
40,786
IRR = 14% +
llustration 4.11
Project X
Interpolation between 14%
and 15%
Project Y
Year
Compute :
2
3
IRR = 14% + .78 = 14.78%
4
5
122
122-(-35)
Solution:
Calculation of NPV:
-210
CF,
40,000
80,000
90,000
PU of Inflows
75,000
CP
-210 40
25,000
43,756
Project X =
43,171
Less; Initial Cost
Project Y =
42,780
Net present Value
Calculation of PI:
42,520
35,000
() The NPV and PI of each project.
40,000
222
A company is considering which of two mutually exclusive
projects it should undertake. The finance director thinks that
the project with higher NPV should be chosen as both projects
have the same initial outlay and length of life. The company
anticipates a cost of capital of 10% and the net after tax cash
flows of the project are as follows:
CF,
2,22,000
10,000
10,000
6,000
6000
PV of Inflows
Initial Cost
Project B
PV of Inflows
Initial Cost
PVP,
2
80
NPV 12% 2064
10
NPV O I7% 176
(209%,)
IRR =17% +
(i) Statewith reasons which project you would recommend.
[BCom. (H), D.U. 2011]
PVF.
279
233
10, n
909
194
.826
162
.751
162
.683
162
NPV a 18% -172
Interpolation between 17%
and 18%
.621
IRR = 17% +51= 17.51%
3
90
10
176
176 -(-172)
36,360
66,080
75
PV,
67,590
51,525
72,36,780
15,525
72,10,000
2,25,392
4
72,10,000
12,208
10,059
6
8,299
83
PV
6,888
5,670
6,480
3,22,676
(Figures in ?)
(? '000)
5
25
=1.073
2,01,798
PV,
2,36,780 2,25,392
2,10,000 2,10,000
8,260
26,780 15,392
7,510
=1.127
4,098
3,726
cepted.

6. 84
As
per the NPV and Pl methods, Projc shoukd be pre
ferred.
Howevet,
Project Y has a a very long inflow in the first year itscll So. the risk level ol Projcct Yis lowet, and a fim
mav prcter even Projet )
lustration 412
Solution:
10
A compan1 is engaged in cvaluating an investment projet which requires an initial cash outlay of 2.50,000 on cquip
ment The projet's conomi life is 10 vears and its salvage
value 30.000 h would requine cunnt assets of 50,000. An
additional investment of 60.000 1would also be necessary at
the end of five ears to restore the cficiency of the equip
ment. This would be written off completelv over the last five
vears. The project is expected to vield annual profit (before
tax) of L00,000. The company follows the sum of the years
digit method of depreciation. Income-tax rate is assumed to
be 40%. Should the proiect be accepted if the minimum
required rate of return is 20%?
Calculation of Present Values
Yegr
EBIT ) Dep. ()
L.00.000
40.000
L00.000 36,000 64.000
1.00,000 32,000 68,000
1,00.000
1,00,000
1,00,000
Total
1,00,000
1.00,.000
1,00,000
1.00,000
Initial cost
28,000
24.000
40,000
Working Notes :
32,000
24.000
PV of Cash Outfiows ()
PART | LONG TERM INVESTMENT DECISIONS CAPITAL BUDGETING
16,000
8.000
Current assets
Investment-60,000X
PATK) CFO) PVE PV()
60,000 36,000 76,000 833 63,308
38,400 74,400 .694 51,634
40,800 72,800 .579 42,151
PBTC)
72,000
76,000
60,000
68,000
70.000
84,000
92,000
45,600 69,600 402 27,979
36,000 76,000
40,800 72,800
45,600 69,600
50,400 66,400
55.200 63,200
335
279
PVFgj0 X 80,000
3,24,120 Total
194
162
PV of Cash Inflows ()
2,50,000 Annual Inflows
50,000 Salvage value
34,318
233 16,217
30,000
50,000
25,460
20,311
12,882
10,238
3,04,498
3,04,498
12,960
3,17,458
The NPV of the proposal, therefore, is 3,17,458-7 3,24,120 =
7 -6,662. Since the NPV of the proposal is negative, the
proposal needs to be rejected.
1. The depreciation of different years have been calculated
as per sum of the year's digit method as follows: Initial
outlay -Salvage value ie., 2,50,000 30,000 is to be
depreciated over 10 years. The sum of the years digits for
the years1 -10is55. So, depreciation for year l is?2,20,000
X(10/55) and for the year 2 it is 2,20,000 X (9/55) and so
on. The total depreciation for first 5 years is 1,60,000 and
so the written down value of the asset at the end of year
5, is? 90,000 (ie, ? 2,50,000-1,60,000). A capital expendi
ture of 60,000 is required at that stage. So, the total cost
required to be depreciated is 1,20,000 (ie., 90,000 +
60,000 -30,000) and as per the sum of the years digit
method for 5 years (ie, remaining life), the depreciation
for the year 6 is 1,20,000 X (5/15), for year 2 is 1,20,000
X (4/15) and so on.
2. Thecash flowsfor different years havel
been
calculated,
3. Thecurrent assets of ? 50,000 would he
of vear 10and therefore, it has been included in thei
llustration 4.13
The cash flows from two mutually exclusive
Projects
Aand,
are as under:
0
Years
1-7 (Annual)
Project Life
of year l0,.
Dis.Rate
15%
Profits after Tax depreciation.
16%
179%
18%
() Calculate NPV of the proposals at different discra
rates of 15%, 16%, 179%, 18%, 19% and 20%.
19%
(i) Advise on the project on the basis of IRR method
Solution:
20%
Computation of Present Value of Cash nflows of Differens
Projects.
15%
| Dis. Rate
16%
17%
18%
199%
20%
Cash Flow ()
Proj.A
Calculation of NPV:
6,000
6,000
6,000
6,000
6,000
6,000
24,960
= 17% t
24,240
23,532
22,872
22,235
PV of Inflows(A)
21,630
Calculation of IRR:
Proj.B
7,000
7,000
454
7,000
7,000
Project A
7,000
?-22,000
7,000
6,000
7 Years
PVAF 9
R2,960
2,240
1532
872
released at thee
235
4.160
-370
4.040
3.922
3.812
Proj.A
NPV(A) PV of Inflows(B)
PV Cash flows (?)
24,960
24.240
23,532
22,872
3.706 22,235
3.605 21,630
7 29,120
28,280
27,454
Project
{-27,009
26,784
1Years
25,942
25,235
X(18-17)= 17.59%
Proj.B
29,120
28,280
27,454
26.684
25.942
25,235
NPV(B)
2,120
1.280
454
-216
Project A:Since outflow of T 22,000 is falling between22,235
and 21,630, the IRR must be between 19% to 20%. S0.
interpolating the difference ofR 605 between 19% and 20%, the
IRR comes to 19.39%.
-1,058
235
= 19% +
X (20-19) = 19.39%
235 -(-370)
Project B:Since outflow of T 27,000 is falling between27,454
and ? 26,684, the IRR must be between 17% to 18%. So,
interpolating the difference of 770 between 17% and 18%, the
IRR comes to 17.59%.
-1,765
454-(-216)
Conclusion : As per the NPV technique, the Project A is
acceptable even if the discount rate is as high as 19%, whereas
the Project B becomes unviable even at 18%. As per IRK
technique, the Project A is acceptable and is having an IRR ol
19.39% against the IRR of 17.59% of Project B.
43,200 71,200 482
24.120 Current assets