16-9. Kohwe Corporation plans to issue equity to raise $50 million to finance a new investment.

After
making the investment, Kohwe expects to earn free cash flows of $10 million each year. Kohwe
currently has 5 million shares outstanding, and it has no other assets or opportunities. Suppose the
appropriate discount rate for Kohwe’s future free cash flows is 8%, and the only capital market
imperfections are corporate taxes and financial distress costs.
a. What is the NPV of Kohwe’s investment?
b. What is Kohwe’s share price today?
Suppose Kohwe borrows the $50 million instead. The firm will pay interest only on this loan each
year, and it will maintain an outstanding balance of $50 million on the loan. Suppose that Kohwe’s
corporate tax rate is 40%, and expected free cash flows are still $10 million each year.
c. What is Kohwe’s share price today if the investment is financed with debt?
Now suppose that with leverage, Kohwe’s expected free cash flows will decline to $9 million per
year due to reduced sales and other financial distress costs. Assume that the appropriate discount
rate for Kohwe’s future free cash flows is still 8%.
d. What is Kohwe’s share price today given the financial distress costs of leverage?
10
a.  50  $75 million
0.08
75
b.  $15 / share
5
75  0.4  50
c.  $19 / share
5
9
 50  0.4  50
d. 0.08  $16 / share
5

17-29. AMC Corporation currently has an enterprise value of $400 million and $100 million in excess
cash. The firm has 10 million shares outstanding and no debt. Suppose AMC uses its excess cash
to repurchase shares. After the share repurchase, news will come out that will change AMC’s
enterprise value to either $600 million or $200 million.
a. What is AMC’s share price prior to the share repurchase?
b. What is AMC’s share price after the repurchase if its enterprise value goes up? What is AMC’s
share price after the repurchase if its enterprise value declines?
c. Suppose AMC waits until after the news comes out to do the share repurchase. What is AMC’s
share price after the repurchase if its enterprise value goes up? What is AMC’s share price
after the repurchase if its enterprise value declines?
d. Suppose AMC management expects good news to come out. Based on your answers to parts
(b) and (c), if management desires to maximize AMC’s ultimate share price, will they
undertake the repurchase before or after the news comes out? When would management
undertake the repurchase if they expect bad news to come out?
e. Given your answer to part (d), what effect would you expect an announcement of a share
repurchase to have on the stock price? Why?
a. Because Enterprise Value = Equity + Debt – Cash, AMC’s equity value is
 Equity = EV + Cash = $500 million.
Therefore,
Share price = ($500 million) / (10 million shares) = $50 per share.
b. AMC repurchases $100 million / ($50 per share) = 2 million shares. With 8 million remaining share
outstanding (and no excess cash) its share price if its EV goes up to $600 million is
Share price = $600 / 8 = $75 per share.
And if EV goes down to $200 million:
Share price = $200 / 8 = $25 per share.
c. If EV rises to $600 million prior to repurchase, given its $100 million in cash and 10 million shares
outstanding, AMC’s share price will rise to:
Share price = (600 + 100) / 10 = $70 per share.
If EV falls to $200 million:
Share price = (200 + 100) / 10 = $30 per share.
The share price after the repurchase will be also be $70 or $30, since the share repurchase itself does
not change the stock price.
Note: the difference in the outcomes for (a) vs (b) arises because by holding cash (a risk-free asset)
AMC reduces the volatility of its share price.
d. If management expects good news to come out, they would prefer to do the repurchase first, so that
the stock price would rise to $75 rather than $70. On the other hand, if they expect bad news to come
out, they would prefer to do the repurchase after the news comes out, for a stock price of $30 rather
than $25. (Intuitively, management prefers to do a repurchase if the stock is undervalued—they
expect good news to come out —but not when it is overvalued because they expect bad news to
come out.)
e. Based on (d), we expect managers to do a share repurchase before good news comes out and after
any bad news has already come out. Therefore, if investors believe managers are better informed
about the firm’s future prospects, and that they are timing their share repurchases accordingly, a
share repurchase announcement would lead to an increase in the stock price.

18-6. Acort Industries has 10 million shares outstanding and a current share price of $40 per share. It
also has long-term debt outstanding. This debt is risk free, is four years away from maturity, has
annual coupons with a coupon rate of 10%, and has a $100 million face value. The first of the
remaining coupon payments will be due in exactly one year. The riskless interest rates for all
maturities are constant at 6%. Acort has EBIT of $106 million, which is expected to remain
constant each year. New capital expenditures are expected to equal depreciation and equal $13
million per year, while no changes to net working capital are expected in the future. The corporate
tax rate is 40%, and Acort is expected to keep its debt-equity ratio constant in the future (by either
issuing additional new debt or buying back some debt as time goes on).
a. Based on this information, estimate Acort’s WACC.
b. What is Acort’s equity cost of capital?
a. We don’t know Acort’s equity cost of capital, so we cannot calculate WACC directly. However, we
can compute it indirectly by estimating the discount rate that is consistent with Acort’s market value.
First, E = 10 × 40 = $400 million. The market value of Acort’s debt is
1  1  100
D  10  1    $113.86 million.
0.06  1.064  1.064
Therefore, Acort’s enterprise value is E + D = 400 + 113.86 = 513.86.
Acort’s FCF = EBIT×(1 –  C ) + Dep – Capex – Inc in NWC

FCF = 106 × (1 – 0.40) = 63.6

Because Acort is not expected to grow,
 63.6 63.6
V L  513.86  and so rwacc   12.38%.
rwacc 513.86

E D
b. Using rwacc  rE  rD (1  c ) ,
ED DE
400 113.86
12.38%  rE  6%(1  0.40)
513.86 513.86
solving for rE:
513.86  113.86 
rE  12.38%  6%(1  0.40)   14.88%.
400  513.86 

18-5.

18-18. Your firm is considering building a $600 million plant to manufacture HDTV circuitry. You expect
operating profits (EBITDA) of $145 million per year for the next 10 years. The plant will be
depreciated on a straight-line basis over 10 years (assuming no salvage value for tax purposes).
After 10 years, the plant will have a salvage value of $300 million (which, since it will be fully
depreciated, is then taxable). The project requires $50 million in working capital at the start, which
will be recovered in year 10 when the project shuts down. The corporate tax rate is 35%. All cash
flows occur at the end of the year.
a. If the risk-free rate is 5%, the expected return of the market is 11%, and the asset beta for the
consumer electronics industry is 1.67, what is the NPV of the project?
b. Suppose that you can finance $400 million of the cost of the plant using 10-year, 9% coupon
bonds sold at par. This amount is incremental new debt associated specifically with this project
and will not alter other aspects of the firm’s capital structure. What is the value of the project,
including the tax shield of the debt?
a. First we compute the FCF:
FCF0 = –600 (Capex) – 50 (Inc in NWC) = –650
Using Eq. 7.6:
FCF1–9 = 145 × (1 – 0.35) + 0.35 × 60 = 115.25
After-tax Salvage Value = 300 × (1 – 0.35) = 195
FCF10 = 145 × (1 – 0.35) + 0.35 × 60 + 50 (Inc in NWC) + 195 (salvage)
= 360.25
From the CAPM, rU = 5% + 1.67(11% – 5%) = 15%
Therefore,
1  1  360.25
NPV  650  115.25  1    11.0
.15  1.159  1.1510
Without leverage, project NPV is –$11 million.
b. Because the debt level is predetermined, we can use the APV approach. Because the bonds initially
trade at par, the interest payments are the 9% coupon payments of the bond. Assuming annual
coupons:
1  1 
PV(ITS)  400  0.09  0.35  1    $80.9 million.
.09  1.0910 
Therefore,
APV = NPV + PV(ITS) = –11 + 81 = $70 million.
 Note that this project is only profitable as a result of the tax benefits of leverage.

18-24. Propel Corporation plans to make a $50 million investment, initially funded completely with debt.
The free cash flows of the investment and Propel’s incremental debt from the project follow:

Propel’s incremental debt for the project will be paid off according to the predetermined schedule
shown. Propel’s debt cost of capital is 8%, and its tax rate is 40%. Propel also estimates an
unlevered cost of capital for the project of 12%.
a. Use the APV method to determine the levered value of the project at each date and its initial
NPV.
b. Calculate the WACC for this project at each date. How does the WACC change over time?
Why?
c. Compute the project’s NPV using the WACC method.
d. Compute the equity cost of capital for this project at each date. How does the equity cost of
capital change over time? Why?
e. Compute the project’s equity value using the FTE method. How does the initial equity value
compare with the NPV calculated in parts (a) and (c)?
a. Note that this answer actually uses the APV method instead of the WACC method.
We compute VU at each date by discounting the project’s future FCF at rate rU = 12%.

( VtU  NPV(rU , FCFt 1 : FCFT ) ):

Year 0 1 2 3
FCF -50 40 20 25
Vu $69.45 $37.79 $22.32
Then we compute the value of the future interest tax shields at each date by discounting at rate rD =
8% :

Year 0 1 2 3
D 50 30 15 0
interest at 8% 4 2.4 1.2
tax shield at 40% 1.6 0.96 0.48
PV(ITS) $2.69 $1.30 $0.44

Finally, we compute VL = APV = VU + PV( ITS) :

Year 0 1 2 3
Vu $69.45 $37.79 $22.32
PV(ITS) $2.69 $1.30 $0.44
VL $72.14 $39.09 $22.77

Given the initial investment of $50, the project’s NPV is 72.14 – 50 = $22.14.
b. We can compute the WACC at each date using Eq. 18.21. The debt-to-value ratio, d, is given by
D/VL. The debt persistence  is given by Tsc D, where Ts PVITS (since all tax shields are
predetermined):
 Year 0 1 2 3
D 50 30 15 0
VL $72.14 $39.09 $22.77
L
d = D/V 69% 77% 66%
s
T = PV(ITS) $2.69 $1.30 $0.44
s
T /tcD 13.4% 10.8% 7.4%
rwacc 9.63% 9.41% 9.81%
Note that the WACC changes over time, decreasing from date 0 to 1, and increasing from date 1 to
2. The WACC fluctuates because the leverage ratio of the project changes over time (as does the
persistence of the debt).
c. We can compute the levered value of the project by discounting the FCF using the WACC at each
date:
FCF3 25
V2L    $22.77
1  rwacc (2) 1.0981

FCF2  V2L 20  22.77

V1L    $39.09
1  rwacc (1) 1.0941

FCF1  V1L 40  39.09

V0L    $72.14.
1  rwacc (0) 1.0963
Note that these results coincide with part (a).
d. We can compute the project’s equity cost of capital using Eq. 18.20. Note that Ds  D Ts  D
PVITS:
Year 0 1 2 3
D s = D - Ts $47.31 $28.70 $14.56
E = VL - D $22.14 $9.09 $7.77
s
D /E 2.14 3.16 1.87
rE 20.55% 24.63% 19.50%
Note the equity cost of capital rises and then falls with the project’s effective debt-equity ratio, DsE.
e. We first compute FCFE at each date by deducting the after-tax interest expenses (equivalently,
deducting interest and adding back the tax shield) and adding net increases in debt:
Year 0 1 2 3
FCF -50 40 20 25
- Interest -4 -2.4 -1.2
+ Tax shield 1.6 0.96 0.48
+ Inc. in Debt 50 -20 -15 -15
FCFE 0 17.6 3.56 9.28
E 22.14 9.09 7.77
Then, we compute the equity value of the project by discounting FCFE using r E at each date:
FCFE3 9.28
E2    $7.77
1  rE (2) 1.1950

FCFE 2  E 2 3.56  7.77

E1    $9.09
1  rE (1) 1.2463

FCFE1  E1 17.60  9.09

E0    $22.14 /
1  rE (0) 1.2055

These values for equity match those computed earlier, and match the project’s initial NPV.
 Note that to use the WACC or FTE methods here, we relied on V L computed in the APV method.
We could also solve for the value using the WACC or FTE methods directly using the techniques in
appendix 18A.3.

11-3: Cash flows, NPV, IRR and Payback Period

Super Dairy Limited (STL) is planning to buy dairy equipment costing Rs 300 lacs. Milk Board provides 10%
subsidy on the capital cost. It can process milk to produce cheese with the capacity of 1800 tons per
annum. The selling price of cheese is taken as Rs 50 per Kg. The management of expects the life of the
plant at 8 years and the depreciation policy is SLM. However the plant can be sold at Rs 50 lacs at the
end of its useful life. The utilisation of plant is expected as below:
Years 1 2 3 4 to 8
Capacity 60% 70% 80% 90%
utilisation
The variable cost constituting primarily of the raw material, milk is placed at 40% while the fixed
expenses are Rs 300 lacs per annum. The firm pays 35% tax. The additional working capital required is Rs
100 lacs.
Find the following:
a) Cash flows of the project from Year 0 to Year 8
b) NPV of the project
c) IRR of the project, and
d) Payback period
e) Should the project be accepted based on NPV and IRR.

Solution:
Initial year cash flow Rs lacs
Cost of the plant 400 Depreciation
Increase in working
capital 100 Life of the plant 8
Annual Rs 50
Less: Subsidy 40 depreciation lacs
Cash out flow 460
Projection of annual cash flows
Selling price
Capacity 1800 Tons (Rs/Kg) 50
Year 1 2 3 4
Capacity 60% 70% 80% 90%
utilisation
Tons of cheese 1,080 1,260 1,440 1,620
produced
Rs lacs
Revenue 540.00 630.00 720.00 810.00
Variable cost 40% 216.00 252.00 288.00 324.00
Fixed overheads 300.00 300.00 300.00 300.00
Depreciation 50.00 50.00 50.00 50.00
Profit before tax -26.00 28.00 82.00 136.00
Tax 35% -9.10 9.80 28.70 47.60
Profit after tax -16.90 18.20 53.30 88.40
Cash flow after 33.10 68.20 103.30 138.40
tax
Terminal year cash flows Rs lacs
Salvage value realised 50.00
Book value -
Profit/(loss) 50.00
Tax paid 17.50
Net cash flow from selling the machine 32.50
Release of working capital 100.00
11-9: Mutually Exclusive Proposals
Bharat Airlines Limited is considering to an aircraft. It has two alternatives - a Boeing or an airbus. The
initial investment and annual operational cost and the salvage value at the end of 20 years is given
below:
Rs In lacs Boeing Airbus
Initial investment 700 920
Annual Operating Costs
Operational cost 150 100
Maintenance cost 140 120
Other costs 60 50
Salvage value 35 92
The firm pays 40% tax and charges depreciation on SLM basis. The life of aircraft is 20 yeaRs
Which of the aircraft Bharat Airlines must buy if its cost of capital is 12%?
Solution:
We shall compare the present value of cost of both the alternatives to arrive at the decision to buy
airbus or Boeing aircraft.
Rs In lacs Boeing Airbus
Initial investment 700.00 920.00
Annual Operating Costs
Operational cost 150.00 100.00
Maintenance cost 140.00 120.00
Other costs 60.00 50.00
Total cost 350.00 270.00
Tax saved 40% 140.00 108.00
Post tax cost 210.00 162.00
Present value of post tax cost 1,568.58 1,210.05
Less: benefits
Depreciation tax shield
Depreciation 35.00 46.00
Tax shield on depreciation 14.00 18.40
Present value of tax shield 104.57 137.44
Salvage value
Value realised 35.00 92.00
Less: tax paid 14.00 36.80
Value realised net of tax 21.00 55.20
Present value 2.18 5.72
Present value of post tax cost 2,161.83 1,986.89
Required rate of 12%
Period of annuity 20 years return
Present value of annuity for 20 years at 12.00% =
PVIFA (12.00% , 20) = 7.4694
Required rate of 12%
Period 20 years return
Present value of Rs 1 after 20 years at 12.00% =
PVIF (12.00% , 20) = 0.1037
Since present value of cost of buying Airbus is less the airline must purchase airbus.

23-1: Changing the Credit Period

Transient Ltd is currently operating at the 65% capacity utilization level with its sales pegged at
Rs 950 lakhs. As per its current credit policy the firm is offering a credit period of 20 days. The
average collection period for Transient Ltd is 30 days. In view of increased competition that
has of late started to erode its bottom-line the firm's management has been contemplating
relaxing its credit terms. As per management's projections such a liberalization of firm's credit
policy is likely to boost its sales by 30%.However, since the proposed change is likely to increase
the average credit period for the firm by 30 days, one section of company management is
opposed to such a change proposed in the credit policy and is advocating a status quo. The
variable costs for the firm are 75% of the sales. Are you in favour of such a change proposed
in the firm's credit policy? Assume the opportunity cost of capital for Transient Ltd is 12%.

Solution Current Sales (Rs in lakhs) 950

Sales under proposed credit policy (Rs in lakhs) 1,235
Incremental sales under proposed credit policy (Rs in 285
lakhs)
Variable cost (as % of sales) 75%
,Contribution (as % of sales) 25%
Profits on incremental sales (Rs In lakhs) 71.25
Current average collection period (in days) 30
Average collection period under proposed policy (in 60
days)
Receivables turnover ratio (Present policy) 12
Receivables turnover ratio (Proposed policy) 6
Opportunity cost of capital for the firm 12%

Comparison of present and proposed credit policy Present Proposed

(Rs In lakhs)
Average daily sales (Sales/360) 2.64 3.43
Receivables (Sales/ Receivables turnover) 79.20 205.83
Cost of receivables at 12% 9.50 24.70
Incremental cost of receivables - 15.20
Incremental profit (net of cost) 56.05

13-13: WACC - Book Value, Market Value and Specific Sources

Anand Industries has three sources of capital - the equity shares, preference shares and straight
debt, costing 18%, 15% and 7% respectively.

The proportions of different kinds of capital as reflected in the balance sheet and as per the market
values are as under:

Capital Book value Market value

Equity 50% 70%
Preference 20% 15%
Debt 30% 15%

Find out the WACC based on a) book values b) market values.

Anand Industries wishes to raise the capital for an expansion programme with equity, preference
and debt at 15%, 35% and 50%. What would be the cost of capital for the expansion
programme?
Solution: Following is given
Proportions of value
Source of funds Cost Book Market Specific
Equity 18.00% 50% 70% 15%
Preference 15.00% 35%
Shares 20% 15%
Debt 7.00% 30% 15% 50%
Book Value Market Value Specific
Cost, % Weight, % Cost, % Weight, % Cost, % Weight, % Cost, %
Equity 18% 50% 9.00% 70% 12.60% 15% 2.70%
Preferenc 15% 20% 3.00% 15% 2.25% 35% 5.25%
e Shares
Debt 7% 30% 2.10% 15% 1.05% 50% 3.50%
WACC 14.10% 15.90% 11.45%

23-17. MacKenzie Corporation currently has 10 million shares of stock outstanding at a price
of $40 per share. The company would like to raise money and has announced a rights issue. Every
existing shareholder will be sent one right per share of stock that he or she owns. The company plans
to require five rights to purchase one share at a price of $40 per share.
a. Assuming the rights issue is successful, how much money will it raise?
b. What will the share price be after the rights issue? (Assume perfect capital markets.)
Suppose instead that the firm changes the plan so that each right gives the holder the right to
purchase one share at $8 per share.
c. How much money will the new plan raise?
d. What will the share price be after the rights issue?
e. Which plan is better for the firm’s shareholders? Which is more likely to raise the full amount
of capital?
a. 10m shares/5  40 = $80 million
b. 12m total shares, Value = $400 million + 80 million in new capital = $480
Share price = 480/12 = $40
c. 10m  $8 = $80 million
d. $480/20 = $24 per share
e. Shareholders are the same either way. In the first case, each share is worth $40, and exercising the
right has 0 npv, so the total value of a share is $40.
In the second case, the share is worth $24, but the right is worth (24 – 8) = $16, so the total value
from owning a share is $24 + $16 = $40 per share.
However, the second plan is much more likely to be fully subscribed, because exercising the right is
a good deal. In the first case, shareholders are indifferent between exercising and not exercising.

Q. No. 13
(a) Consider the following mutually exclusive projects :
Cash Flows (Rs.)

Projects C0 C1 C2 C3 C4

A -10,000 6,000 2,000 2,000 12,000

B -10,000 2,500 2,500 5,000 7,500

C -3,500 1,500 2,500 500 5,000

D -3,000 0 0 3,000 6,000

Required:
(i) (i) Calculate the payback period for each project.
(ii) (ii) If the standard payback period is 2 years, which project will you select?
Will your answer differ, if standard payback period is 3 years ?
(iii) (iii) If the cost of capital is 10%, compute the discounted payback period for
each project. Which projects will you recommend, if standard discounted payback
period is (1) 2 years; (ii) 3 years ?
(iv) (iv) Compute NPV of each project. Which project will you recommend on the
NPV criterion ? The cost of capital is 10%. What will be the appropriate choice
criteria in this case ? The PV factors at 10% are :
Year 1 2 3 4

PV factor at 10% 0.9091 0.8264 0.7513 0.6830

(CA Nov. 2007 PE II)

Answer:
(i) (i) Table showing cumulative cash flows :
Year A B C D
1 6000 2500 1500 0
2 8000 5000 4000 0
3 10000 10000 4500 3000
4 22000 17500 9500 9000

Project Payback period

A 3 years
B 3 years
 C 1 year + 2000/2500 year = 1.80 year =
1 year 9 months 18 days
D 3 years

(ii) If the standard payback period is 2 years, C may be taken up.

If standard payback period is 3 years, any one of the four may be taken

(iii) Table showing cumulative cash flows :

Year A B C D
1 5,455.00 2,273.00 1,364.00 0
2 7,108.00 4,339.00 3,430.00 0
3 8,611.00 8,096.00 3,806.00 2,254.00
4 16,807.00 13,217.00 7,221.00 6,352.00

Project Payback period

A 3 years + 1389/8196 year=3.17 years=3 years 2 months 1day
B 3 years + 1904/5123 year=3.37 years=3 years 4 months 6 days
C 2 year + 70/376 year = 2.1862 years = 2 years 2 months 7 days
D 3 year + 746/4098 year = 3 years 2.18 months
= 3 years 2 months 6 days

If the standard discounted payback period is 2 years, none of the projects should be accepted.
If the standard discounted payback period is 3 years, C may be accepted.

(iv)
Period A B C D
0 -10,000 -10,000 -3,500 -3,000
1 6,000 x 0.9091 2,500 x 0.9091 1,500 x 0.9091 0
2 8,000 x 0.8264 5.000 x 0.8264 4,000 x 0.8264 0
3 10,000 x 0.7513 10,000 x 0.7513 4,500 x 0.7513 3000 x 0.7513
4 22,000 x 0.6830 17,500 x 0.6830 9,500 x 0.6830 9000 x 0.6830
NPV 6806 3218 3720 3352

On the basis of NPV, A may be accepted as its amount of NPV is the highest.
12-6: Risk Adjusted Discount Rate
A firm has several projects on hand. These projects have varying size, annual cash flows, lives,
and risks as given below:
Project A Project B Project C Project D Project E
Initial outlay,
Rs lacs 100 120 135 165 200
Expected
annual cash
inflow, Rs Lacs 30 45 55 70 90
Life of the
project, Years 5 5 6 6 4
Co-efficient
of variation of
cash flow 0.40 0.60 0.80 1.20 0.60
Beta of the
project 1.30 1.20 0.95 1.40 1.60
i) Find out the order of preference of different projects based on discount rate arrived at using
CAPM model assuming risk free rate at 8% and market return at 14%.
ii) Rank the projects based on cost of capital based on coefficient of variation as benchmark
assigning a premium of 15% for coefficient of variation over a constant rate of 10%.
iii) Rank the projects based on management's view of cast of capital for different projects as
follows:

Project Project A Project B Project C Project D Project E

Management 12.00% 13.00% 15.00% 18.00% 20.00%
's discount
rate

Solution:
The parameters of the projects are listed below:
Project A Project B Project C Project D Project E
Initial outlay,
Rs lacs 100 120 135 165 200
Expected annual cash inflow, Rs
Lacs 30 45 55 70 90
Life of the
project, Years 5 5 6 6 4
Co-efficient of variation of cash
flow 0.40 0.60 0.80 1.20 0.60
Beta of the
project 1.30 1.20 0.95 1.40 1.60
Project A Project B Project C Project D Project E
Ranking as per cost of capital based on CAPM
Discount rate 15.80% 15.20% 13.70% 16.40% 17.60%
as per CAPM
Risk free rate 8.00%
Market return 14.00%
PV factor 3.2896 3.3363 3.9208 3.6460 2.7111
PV of cash
inflows, Rs
lacs 98.69 150.14 215.65 255.22 244.00
NPV, Rs lacs -1.31 30.14 80.65 90.22 44.00
Rank 5 4 2 1 3
Ranking as per cost of capital based on Coefficient of Variation
Discount rate 16.00% 19.00% 22.00% 28.00% 19.00%
as per CV
Model
Constan t10.00%
Premiu 15.00%
PV factor 3.2743 3.0576 3.1669 2.7594 2.6386
PV of cash
inflows, Rs
lacs 98.23 137.59 174.18 193.16 237.47
NPV, Rs lacs -1.77 17.59 39.18 28.16 37.47
Rank 5 4 1 3 2
Ranking as per cost of capital based on Management's perception
Management
's discount
rate 12.00% 13.00% 15.00% 18.00% 20.00%
PV factor 3.6048 3.5172 3.7845 3.4976 2.5887
PV of cash
inflows, Rs
lacs 108.14 158.28 208.15 244.83 232.99
NPV, Rs lacs 8.14 38.28 73.15 79.83 32.99
Rank 5 3 2 1 4