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FIN622 - Corporate Finance

ABC Company is considering the acquisition of a machine to improve its production. The company has to make a choice between two types of machine A and B. Each machine will have a 4-year life with no salvage value.
Cost of capital of the firm is 14%. Initial investments required to purchase and install the machines A and B, are PKR 28,700 and PKR 27,050 respectively. Machine A will generate an inflow of PKR 10,000 each year while Machine B is expected to generate cash inflows in the following manner.

Year          Cash Inflows (PKR)
1               11,000
2               10,000
3               9,000
4                8,000


Calculate NPV and IRR for both options. Which machine should be preferred and why?

For calculating IRR you are required to use “Trial and Error Method” along with “Interpolation Technique/Formula”. In this particular regard, you are advised to consult PPT slideshow “Finding IRR is no more difficult” uploaded in the lesson contents of Lesson # 10.

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Replies to This Discussion


1. NPV

2. IRR 

if we find out NPV than IRR is outometice find it. and assignment complate.

Itni Easy Assignment

i need serious students to discuss study related issues specially finance related to increase knowledge of each other. are you??

Sure... SHARIQ

HMM good! very nice Assignment ...

I am 100% Serious

it is very interesting

m also serious 200% guyzzz

cost of capital 14 % he kia ye(K)he

Cost if Capital wo cost hoti hai jo aap ko capital (equity + debt) ke against bear kerni parti hai, jaisay equity ki cost dividend hai or debt ki interest.

tu is me hum jo NPV nikalye gye wo cost of capital yani 14 % ko discount rate lye gye ya ni



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