1. Calculate discounted Payback period in months of project with initial investment of Rs.

250 and inflows for 4 months as 50, 75, 150 & 200. Assume rate of discounting as 12%
p.a.
2. A company with 10% cost of funds and limited investment of Rs. 300 million is
evaluating the desirability of several investment proposals:
Project Initial Investment Life in years Annual Cash flow
(Rs in Million) ( Rs. In Million)
P 120 5 40
Q 75 3 35
R 100 4 45
S 50 6 25
T 150 8 30
a. Rank the projects according to Profitability Index & NPV Method.
b. Determine the optimal Investment package.
3. ABC Ltd is evaluating a project whose expected cash flows are as follows:
Year Cash Inflows (Rs)
0 (25,00,000)
1 4,25,000
2 5,00,000
3 7,50,000
4 15,00,000
5 7,50,000

a. What is the NPV of the project, if the discount rate is 14% for the entire period?
b. What is the NPV of the project, if the discount rate is 12% for the first year and rises
every year by 1% ?
4. What is IRR of the Investment, which involves a current outlay of Rs. 5,00,000 and result
in an annual cash inflow of Rs. 1,00,000 for 8 Years ?

5. A company considering two projects, Project A and Project B, each project requires as
initial outlay of Rs. 60 lakhs. The expected cash flow from these projects are shown
below:
Year Project A ( Rs in Lakhs) Project B (Rs in Lakhs )
1 15 35
2 20 25
3 35 20
4 40 15

1. What is the payback period for each of the Project?

2. What is the discounted payback period for each of the projects if the cost of capital is
12% ?
3. If the two projects are mutually exclusive and cost of capital is 15%, which project should
the company invest in ?
4. What is the IRR of each Project?
5. What is the Modified IRR (MIRR) of each project when cost of capital is 15%?

6. Calculate IRR if investment is 700 and cash flows for 3 years are 325, 350& 400.
7. A Limited company wants to promote a new product with an estimated sales life of 5
years. The manufacturing equipment will cost of Rs. 10,00,000 with scrap value of Rs.
50,000 at the end of five years. The working capital requirement is Rs. 75,000, which will
be released after five years. Interest is considered as zero.
The net profit before interest and depreciation and PV Factor @ 10% are:
Year PV Factor PBITD ( Rs)
1 0.909 5,00,000
2 0.826 6,50,000
3 0.751 7,50,000
4 0.683 7,25,000
5 0.621 5,00,000

The depreciation to be charged under straight line method is Rs. 2,00,000. Income tax
applicable is 45%. Evaluate the proposal using NPV method.

8. Vishakha Enterprise is considering a proposal for the investment of Rs. 25,00,000 on

product development and growth which is expected to generate net cash inflows for 8
years with present value factor of 15% per year.

Year 1 2 3 4 5 6 7 8
CI (lacs) 5 8 10 12 20 15 10 10

9. As project manager should you consider the above proposal for company? Why?

Particulars   Project X Project Y

Investment in Project (Cash 20,00,00
Outflow)     0 22,50,000
Life of Project     6 Years 6 Years
Tax Rate     30% 30%
Cash Inflow Before Tax &
Depreciation Year-1   300000 500000
  2   400000 600000
  3   500000 700000
  4   600000 800000
  5   700000 800000
  6   800000 900000
Evaluate the Project on the basis on
1. Payback Period
Method
2. Discounted Period Method
3. NPV Method
4. P.I
Method
Assuming Rate of Return (Discounting Rate) @ 10%
10.

Particulars     Project A Project B

Investment in Project (Cash
Outflow)     10,00,000 15,00,000

Life of Project     5 Years 5 Years

Tax Rate     30% 30%
Cash Inflow Before Tax &
Depreciaiton Year 1   200000 300000
  2   300000 500000
  3   400000 600000
  4   250000 400000
  5   200000 300000

Evaluate the Project on the basis on 1. Payback Period Method

2. Discounted Period Method
3. NPV Method
4. P.I
Method
Assuming Rate of Return (Discounting Rate) @ 10%

Particulars   Project A Project B

15,00,00
Investment in Project (Cash Outflow)   10,00,000 0

Life of Project   5 Years 5 Years

Tax Rate   30% 30%

Cash Inflow Before Tax &
Depreciaiton Year 1 200000 300000

  2 300000 500000

  3 400000 600000

  4 250000 400000

  5 200000 300000

Evaluate the Project on the basis on 1. Payback Period Method

2. Discounted Period Method

3. NPV Method

4. P.I ethod
6. IRRMETHO
D
Assuming Rate of Return (Discounting Rate) @ 10%