payout is 40 percent? SECTION-D (Compulsory) (115=15) 15. A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each, and have a life of five...

payout is 40 percent?
SECTION-D
(Compulsory)
(115=15)
15. A company is considering two mutually exclusive projects. Both require an
initial cash outlay of Rs.20000 each, and have a life of five years. The
company’s required rate of return is 10% and pays tax at a 35% rate. The
projects with be depreciated on a straight – line basis. The before taxes cash
flows expected to be generated by the projects are as follows. Before-tax cash
flows (Rs.) Project1 2 3 4 5 A 8000 8000 8000 8000 8000B 12000 6000 4000
10000 10000 calcualte for each project: The NPV and the internal rate of
return. Which project should be accepted and why.
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