A firm named Boomerang Pvt Ltd. has 6 different projects: G – L up for review. Information with respect to these project
Posted: Sun Jun 05, 2022 5:26 pm
A firm named Boomerang Pvt Ltd. has 6 different
projects: G – L up for review. Information with respect to these
projects have been given below –
Year
Project G
Project H
Project I
Project J
Project K
Project L
0
- 1000
- 1000
- 1000
- 1000
- 1000
- 1000
1
1000
100
400
500
400
500
2
200
300
500
400
500
3
300
200
500
400
10000
4
400
100
400
5
500
500
400
Payback period
1.0
4.0
4.0
2.0
2.5
2.0
NPV
-90.91
65.26
140.60
243.43
516.31
7380.92
(all figures are in crores)
The firm has a required rate of return is 10
percent.
As a student of corporate finance, you are required
to explain on how the payback period technique provides misleading
information about the following situations –
However, there are situations where the payback
period is useful. Provide an example where payback period is useful
or efficient as a decision-making concept in
Finance.
(2 + 3 Marks)
projects: G – L up for review. Information with respect to these
projects have been given below –
Year
Project G
Project H
Project I
Project J
Project K
Project L
0
- 1000
- 1000
- 1000
- 1000
- 1000
- 1000
1
1000
100
400
500
400
500
2
200
300
500
400
500
3
300
200
500
400
10000
4
400
100
400
5
500
500
400
Payback period
1.0
4.0
4.0
2.0
2.5
2.0
NPV
-90.91
65.26
140.60
243.43
516.31
7380.92
(all figures are in crores)
The firm has a required rate of return is 10
percent.
As a student of corporate finance, you are required
to explain on how the payback period technique provides misleading
information about the following situations –
However, there are situations where the payback
period is useful. Provide an example where payback period is useful
or efficient as a decision-making concept in
Finance.
(2 + 3 Marks)