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A medium sized chemical company is considering two mutually exclusive investment proposals for its expansion programme. Project a requires an investment proposal of Rs.75,00,000 and yearly operating costs of Rs.5,00,000. Proposal B requires an investment proposal of Rs.50,00,000 and yearly operating costs of Rs.10,00,000. The life of the equipment used in both the investment proposals will be 12 years with no salvage value, depreciation is on straitline basis for tax purposes. The anticipated increase in revenues is Rs.15,00,000 per year in both the investment proposals. The tax rate is 35 per cent and the cost of capital is 15 per cent.
Which investment proposal should be undertaken by the Company.