Corporate Finance

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Corporate Finance

If the cost of capital is 18 percent which of the projects (if any) would you choose?

Calculate NPV if cost of capital is 14 percent.

10. A growth company has Rs 4 crore to invest in any or all of the following projects:

(in Rs ’000)

Type of Years

Project cash flow 0 1 2 3

i. Investment (10,000)

Revenue 21,000

Operating 11,000

expenses

ii. Investment (10,000)

Revenue 15,000 17,000

Operating 5,833 7,833

expenses

iii. Investment (10,000)

Revenue 10,000 11,000 30,000

Operating 5,555 4,889 15,555

expenses

iv. Investment (10,000)

Revenue 30,000 10,000 5,000

Operating 15,555 5,555 2,222

expenses

Assume that all expenses are on cash basis.

Tax rate = 35 percent.

Depreciation will be on a straight-line basis.

Ignore salvage value.

Rank projects on the basis of Payback, NPV, IRR, and ROI.

The cost of capital for the company is 15 percent.