Page 438 - Corporate Finance PDF Final new link

NPP

438 Corporate Finance BRILLIANT’S

4 21,000 0.534 11,214 0.516 10,836
5 24,000 0.456 10,944 0.437 10,488
Total 121 (–) 1,347

121

Interpolation: IRR= 17 +  (18 17) = 17.08%
(121 1,347)
Statement Showing Computation of IRR (Machine N) (Amount in `)

Year Cash Flows PV Factors PV PV Factors PV of
@ 20% @ 21% Cash Flows

0 (60,000) 1.000 (60,000) 1.000 (60,000)
1 24,000 0.833 19,992 0.826 19,824
2 21,000 0.694 14,574 0.683 14,343
3 19,000 0.579 11,001 0.564 10,716
4 17,000 0.482 8,194 0.467 7,939
5 16,000 0.402 6,432 0.386 6,176
NPV 193 (–) 1,002

193
Interpolation: IRR = 20 +  (21 20) = 20.16% 
(193 1,002)

CAPITAL RATIONING / H¡${nQ>b ameqZJ

Q.51. Why is there a need for Capital Rationing? Explain.
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OR
Draw a conclusion about Capital Budgeting Methods.
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combination of investment proposals that will
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