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Capital rationing. 1) Nitin Vineet (NV) Ltd, is evaluating six capital investment projects.

The company has allotted Rs 20,00,000 for capital budgeting purposes. The relevant particulars of the project that are independent of one another are as follows Project P1 P2 P3 P4 P5 P6 Investment Needed 10,00,000 3,00,000 7,00,000 9,00,000 4,00,000 8,00,000 Profitability Index 1.21 0.94 1.20 1.18 1.20 1.05

If there is strict capital rationing , which project should be undertaken. Capital Budgeting under uncertainty. 2) The following details are available in respect of a project that requires an initial cost of Rs 5,00,000. Year 1 Cash Flows 2,00,000 1,50,000 40,000 3,00,000 2,00,000 50,000 4,00,000 2,50,000 30,000 Probability 0.3 0.6 0.1 0.3 0.5 0.2 0.2 0.6 0.2

High Growth Average Growth No Growth High Growth Average Growth No Growth High Growth Average Growth No Growth

If the discount rate is 10% . what is the standard deviation of NPV is the cash flows are positively corelated.