From the following information of the two projects calculate the net present value and suggest which of the two projects should be accepted assuming a discount rate of 10%.
TABLE GIVEN BELOW
| Project X | Project Y | |
| Initial Investment | ₹ 25,000 | ₹ 30,000 |
| Estimated Life | 5 years | 5 years |
| Scrap Value | ₹ 1,500 | ₹ 2,000 |
The profits before depreciation and after taxes are as follows:
| Years | 1 | 2 | 3 | 4 | 5 |
| Project X (₹) | 5,000 | 10,000 | 12,000 | 7,000 | 3,000 |
| Project Y (₹) | 20,000 | 10,000 | 7,000 | 5,000 | 2,000 |
Strategic Financial Management
1. From the following information of the two projects calculate the net present value and suggest which of the two projects should be accepted assuming a discount rate of 10%.
TABLE GIVEN BELOW
| Project X | Project Y | |
| Initial Investment | ₹ 25,000 | ₹ 30,000 |
| Estimated Life | 5 years | 5 years |
| Scrap Value | ₹ 1,500 | ₹ 2,000 |
The profits before depreciation and after taxes are as follows:
| Years | 1 | 2 | 3 | 4 | 5 |
| Project X (₹) | 5,000 | 10,000 | 12,000 | 7,000 | 3,000 |
| Project Y (₹) | 20,000 | 10,000 | 7,000 | 5,000 | 2,000 |
2. Nisha has completed her MBA and has joined a company which was going to raise fund from long term sources such as Debt and Equity. Nisha was asked by her manager to prepare a report on which could be a better source of funding for the firm mentioning the advantages of each to be presented to the Management so that it is easy for them to take the decision. Help her to prepare the report.
3 The following information is given for Delta Ltd.
| Earnings per share | ₹ 15 |
| Dividend per share | ₹ 5 |
| Cost of capital | 15% |
| Internal Rate of Return on Investment | 20% |
| Retention Ratio | 65% |
Calculate the market price per share using
a. Gordon’s Dividend Model
b. Walter’s Dividend Model
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