Bharat Limited has to make a decision to select any one project. The projects are:...
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Bharat Limited has to make a decision to select any one project. The projects are: project 1 investment in rubber rollers and project 2 manufacture of automobile components. The initial investments are Rs.1,35,000 for project 1 and Rs.2,40,000 for project 2. There will be no scrap value at the end of the life of both projects. The opportunity cost of capital of the company is 16 percent. The annual incomes are as under: Year Project 1 Project 2 1 - 60,000 2 30,000 84,000 3 1,32,000 96,000 4 84,000 1,02,000 5 84,000 90,000 You are required to compute the Net present value for Project 1 and Project 2. Discuss the criteria to accept or reject a project based on NPV. What other criteria can be looked into to decide on which project to accept?
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