Determine pay back period and net present value?
A company is considering two projects with the subsequent cash flow streams:
|
Year
|
Project A
(Rs.)
|
Project B
(Rs.)
|
Discount
Factor at 10%
|
|
0
1
2
3
4
|
-2,50,000
10,000
1,00,000
1,20,000
1,00,000
|
-2,50,000
1,30,000
1,00,000
80,000
10,000
|
1.0000
0.9091
0.8264
0.7513
0.6830
|
Determine if the cost of capital to the firm is 10%, rank the two projects in terms of
(a) pay back period; and (b) net present value.
Which of these criteria will you make use for selecting a project and why?