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  • Capital Budgeting

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    Shubham Kumar
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    The document compares two capital budgeting projects, Project A and Project B. It provides the rate of interest, costs of the projects, cash inflows for each project over 5 years, and calculates the net present value and internal rate of return for each project. Based on the calculations, Project B has a higher net present value of $11,365.34 and internal rate of return of 9%, compared to Project A which has a negative NPV and IRR below the 10% interest rate. Therefore, Project B is selected as the project to undertake.

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    The document compares two capital budgeting projects, Project A and Project B. It provides the rate of interest, costs of the projects, cash inflows for each project over 5 years, and calculates the net present value and internal rate of return for each project. Based on the calculations, Project B has a higher net present value of $11,365.34 and internal rate of return of 9%, compared to Project A which has a negative NPV and IRR below the 10% interest rate. Therefore, Project B is selected as the project to undertake.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    3 views3 pages

    Capital Budgeting

    Uploaded by

    Shubham Kumar
    The document compares two capital budgeting projects, Project A and Project B. It provides the rate of interest, costs of the projects, cash inflows for each project over 5 years, and calculates the net present value and internal rate of return for each project. Based on the calculations, Project B has a higher net present value of $11,365.34 and internal rate of return of 9%, compared to Project A which has a negative NPV and IRR below the 10% interest rate. Therefore, Project B is selected as the project to undertake.

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    © All Rights Reserved
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    of 3

    CAPITAL BUDGETING

    PROJECT A PROJECT B
    RATE OF INTEREST 10% 10%
    COST OF PROJECT -500000 -600000
    CASH INFLOWS YEAR 1 55000 30000
    CASH INFLOWS YEAR 2 100000 500000
    CASH INFLOWS YEAR 3 50000 60000
    CASH INFLOWS YEAR 4 70000 70000
    CASH INFLOWS YEAR 5 80000 80000

    NPV OF THE PROJECT -$232,304.98 $11,365.34

    IRR OF THE PROJECT -10% 9%

    RATE OF RETURN 10% 11%


    NPV OF PROJECT A -23230498.41% 16167354.78%
    PROJECT TO BE SELECTED
    PROJECT B

    PROJECT B

    12% 13% 14%


    13527216.52% 11037174.53% 8686444.29%

    NPV OF PROJECT A
    20000000.00%
    15000000.00%
    10000000.00%
    5000000.00%
    0.00% NPV OF PROJECT A
    -5000000.00% 9% 10% 11% 12% 13% 14% 15% 16%
    -10000000.00%
    -15000000.00%
    -20000000.00%
    -25000000.00%
    -30000000.00%
    15%
    6465162.20%

    F PROJECT A

    NPV OF PROJECT A
    13% 14% 15% 16%

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