Consider the following investment projects: Cash Flows(Rs) Project C0 C1 C3L -3,000 2,250 +2,700M…

Consider the following investment projects:

                                                           Cash Flows (Rs)      

               Project                           C0                C1                 C3             

               L                              – 3,000            2,250         + 2,700         

               M                             – 3,950         + 2,700         + 3,240         

       (a) Calculate the NPV and PI for each project assuming a 20 per cent cost of capital.

       (b) Which project should be accepted if only one project can be accepted because of capital rationing.

 

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