University of the Poonch Rawalakot

(FACULTY OF MANAGEMENT SCIENCES)

MID TERM:

PAPER: FM

MBA/M.Com

MARKS 30

TIME: 1 HOURS

Question No 1

Using the project cash flows presented , compute NPV, IRR and Payback Period of
the each project's cash flows and determine for each project whether it should be
accepted or rejected.Assume that the cost of capital is 10%.

Year (t)
0
1
2
3
4

Expected Net After-Tax Cash Flows

Project A
Project B
-$2,000
-$2,000
1,000
200
800
600
600
800
200
1,200

Question No 2

Find the interest rate (or rates of return) in each of the following situations.
a. You borrow $700 and promise to pay back $749 at the end of 1 year.
b. You lend $700 and receive a promise to be paid $749 at the end of 1 year.
c. You borrow $85,000 and promise to pay back $201,229 at the end of 10
years.
d. You borrow $9,000 and promise to make payments of $2,684.80 at the
end of each of the next 5 years.
Question No 3
A project costs Rs. 16,000 and is expected to generate cash inflows of Rs.
4,000 each 5 years. Calculate the Interest Rate of Return.