One of your friends, Ali has Rs. 5000 of which he can makeeither of the two inve
ID: 2662072 • Letter: O
Question
One of your friends, Ali has Rs. 5000 of which he can makeeither of the two investments offered by XYZ Corporation. On thebasis of following information, you are requested to advise himwhich proposal he should prefer keeping in mind the NPV analysis.Support your decision with necessary calculation.
Proposal 1:
This proposal is for the period of 4 years i.e. 2009 to 2012 andthe initial investment is Rs. 5000. Cash inflows are givenbelow:
Year
Cash inflows (Rs.)
2009
2000
2010
3000
2011
4000
2012
3000
Proposal 2:
Other option is to invest Rs. 3000 in XYZ Corporation in theyear 2009 which will provide him a steady cash inflow of Rs. 1000for 4 years (year 2009-2012).
And the remaining Rs. 2000 in ABC Corporation in the year 2009which will provide him a steady cash inflow of Rs. 2000 for 4 years(year 2009-2012).
Whereas, the commercial banks provide 10% return on PLS savingaccount.
Year
Cash inflows (Rs.)
2009
2000
2010
3000
2011
4000
2012
3000
Explanation / Answer
x.
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