28. A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs. 10,000 ( with no salvage value ) and a life of 5 years the company required rate of return is 10 % and it pays tax at a rate of 50 % . The project will be depreciated on a straight-line basis. The cash flows (before depreciation& taxes ) expected to be generated by the projects as follows. 2 3 4,000 4,000 3,000 2,000 4 4,000 5,000 Project A 4,000 Project B 6,000 Calculate the net present value & IRR of each project & suggest which project should be accepted & why. 4,000 5,000
28. A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs. 10,000 ( with no salvage value ) and a life of 5 years the company required rate of return is 10 % and it pays tax at a rate of 50 % . The project will be depreciated on a straight-line basis. The cash flows (before depreciation& taxes ) expected to be generated by the projects as follows. 2 3 4,000 4,000 3,000 2,000 4 4,000 5,000 Project A 4,000 Project B 6,000 Calculate the net present value & IRR of each project & suggest which project should be accepted & why. 4,000 5,000
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...
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Transcribed Image Text:28. A company is considering two mutually exclusive projects. Both require
an initial cash outlay of Rs. 10,000 ( with no salvage value ) and a life of 5
years the company required rate of return is 10 % and it pays tax at a rate of
50 % . The project will be depreciated on a straight-line basis. The cash
flows (before depreciation& taxes ) expected to be generated by the projects
as follows.
1
2 3
oject A
Project B
Calculate the net present value & IRR of each project & suggest which project
should be accepted & why.
4,000
6,000
4,000
3,000
4,000
2,000
4,000
5,000
4,000
5,000
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