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# [Solved] ACC501 Assignment 1 Solution & Discussion Fall 2019

Joined: 1 year ago
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23/01/2020 1:09 am

ACC501 BUSINESS FINANCE Assignment 1 Solution & Discussion Fall 2019

ASSIGNMENT NO. 01

DUE DATE: JANUARY 27, 2020                    MARKS: 20

LEARNING OBJECTIVES:

After attempting this assignment, the students will be able to:

• Evaluate any proposed project by using different capital budgeting
• Understand the difference between NPV and
• Derive inferences regarding the acceptance/rejections of the

Alfa Corporation has identified the following two mutually exclusive projects. The CFO of the company wants to evaluate the identified projects. For this purpose he asked Mr. Naveed to evaluate those projects and establish their feasibility with the help of different capital budgeting techniques. Following are the details of the two mutually exclusive projects.

 Period Project A (Rs.) Project B (Rs.) 0 -42,000 -42,000 1 25,000 15,000 2 21,000 17,000 3 15,000 23,000 4 11,000 27,000

As per the company policy, Mr. Naveed decided to evaluate both projects with the help of IRR and NPV techniques of capital budgeting.

# Requirements:

1. What is the IRR for each of these projects? Which project company should accept according to IRR rule? (13 Marks)
2. What is the NPV for each of these projects? If the required rate of return is 12 percent. Which project company should accept according to NPV rule? (5 Marks)
3. If the decision on the basis of NPV is different than that of IRR, which particular criteria company should prefer and why? (2 Marks)

IMPORTANT INSTRUCTIONS:

• Complete calculations are required for every part of the problem. Incomplete calculations will result in loss of
• Discount factors and resulting figures should not be rounded up more than four decimal

IMPORTANT:

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Dear students!

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Joined: 1 year ago
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23/01/2020 1:10 am

ACC501 BUSINESS FINANCE Assignment 1 Solution & Discussion Fall 2019

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(@afsah)
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25/01/2020 1:12 pm

Joined: 1 year ago
Posts: 2359
25/01/2020 10:02 pm

ACC501 BUSINESS FINANCE Assignment 1 Solution & Discussion Fall 2019

@afsah

(@kausar-ali-khan)
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26/01/2020 12:39 am

IRR rate will always be in between the rates we take in Interpolation formula the IRR rate in both the project  is wrongly calculated as 48% or some thing. The correct IRR is around 30%.

(@zaraasif)
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26/01/2020 9:25 pm

@kausar-ali-khan

Do you have the solution?

(@zaraasif)
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26/01/2020 9:26 pm