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MNO Ltd. is evaluating two mutually exclusive projects. The company's cost of capital is 9%...

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Question

Accounting

  • MNO Ltd. is evaluating two mutually exclusive projects. The company's cost of capital is 9% and the tax rate is 32%. Other information relating to both projects is as follows:

Particulars

Project 1

Project 2

Initial Capital

1,500,000

2,000,000

Expected life

4 years

4 years

Annual Revenue (before Tax & depreciation)

450,000

550,000

  • Depreciation is charged on a straight-line basis. You are required to calculate: a. Payback period b. NPV c. Profitability index d. IRR

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