TOTAL MARKS: 20

ATTEMPT BOTH QUESTIONS

DURATION: 45 MINUTES +10 TEN MINUTES FOR UPLOADING

1)Machine A costs Rs 1,00,000 payable immediately and Machine B

costs Rs. 1,20,000 half payable immediately and half payable in one
year’s time. The cash receipts are as follows:

Year Machine A (Rs) Machine B

1 20,000 -
2 60,000 60,000
3 40,000 60,000
4 30,000 80,000
5 20,000 -

At 7% opportunity cost, which machine should be selected on the

basis of NPV?

2)XYZ Ltd. is considering two mutually exclusive projects. The

after tax cash flows associated with these projects are follows:

Year Project A (Rs) Project B (Rs)

0 1,00,000 1,00,000
1 32000 -
2 32000 -
3 32000 -
4 32000 -
5 32000 2,00,000
 The required rate of return Is 11%

What is each project’s IRR?