Question

ABC Company is evaluating whether to invest in two projects. ABC Co. has the

funds to invest in both. The first project is a Rs. 25,00,000 investment in pollution

abatement equipment. The cash savings from implementing this equipment will

be Rs.2,40,000 per year for 25 years. The second project is a robot that will stack

the finished goods product on pallets for shipment. Currently, the product is being

stacked manually. The robot will cost Rs.1,00,00,000. The cash inflows for

project 2 are Year 1: Rs.23,00,000; Year 2: Rs.18,00,000; Year 3: Rs.15,00,000;

and Years 4-10: Rs.10,00,000.

Evaluate each of the projects using each of the capital budgeting methods (IRR,

NPV PI, Payback and Discounted Payback Period and MIRR ). The cost of

capital for ABC Co. is 8%. Discuss your findings and recommendations.

Answer 1

Answer:

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