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Solutions

Solutions (1) The pay back period is 3.214 (Rs 36,000/Rs 11,200) . . (2) According to Table A-4. discount factors closest to 3.214 for 5 years are 3.274 (16 per Catt rate”b r interest) and 3.199 (17 per cent rate of interest). The actual value of IRR which lies...

computation

computation  Unlike the NPV method, calculating the value of IRR is more difficult. The procedure will depend on whether the cash flows are annuity or mixed stream. Annuities The following steps are taken in determining IRR for an annuity: • Determine the pay back...

Accept-Reject Decision

Accept-Reject Decision  The use or the IRR, as a criterion to accept capital investment decisions, involves a comparison of the actual IRR with the required rate of return- also known as the cut-off rate or hurdle rate. TIlt: project would qualify to be accepted if...