ACC 501 Assignment No 1 Solution Fall 2019
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SEMESTER FALL 2019
BUSINESS FINANCE (ACC501)
ASSIGNMENT NO. 01
DUE DATE: JANUARY 27, 2020
MARKS: 20
LEARNING OBJECTIVES:
After attempting this assignment, the students will be able to:
Evaluate any proposed project by using different capital budgeting techniques.
Understand the difference between NPV and IRR.
Derive inferences regarding the acceptance/rejections of the project.
ASSIGNMENT:
Alfa Corporation has identified the following two mutually exclusive projects. The CFO of
the company wants to evaluate the identified projects. For this purpose he asked Mr. Naveed
to evaluate those projects and establish their feasibility with the help of different capital
budgeting techniques. Following are the details of the two mutually exclusive projects.
Period Project A
(Rs.)
Project B
(Rs.)
0 -42,000 -42,000
1 25,000 15,000
2 21,000 17,000
3 15,000 23,000
4 11,000 27,000
As per the company policy, Mr. Naveed decided to evaluate both projects with the help of
IRR and NPV techniques of capital budgeting.
Requirements:
I. What is the IRR for each of these projects? Which project company should accept
according to IRR rule? (13 Marks)
II. What is the NPV for each of these projects? If the required rate of return is 12
percent. Which project company should accept according to NPV rule? (5 Marks)
III. If the decision on the basis of NPV is different than that of IRR, which particular
criteria company should prefer and why? (2 Marks)
IMPORTANT INSTRUCTIONS:
Complete calculations are required for every part of the problem. Incomplete
calculations will result in loss of marks.
Discount factors and resulting figures should not be rounded up more than four
decimal digits.
IMPORTANT:
24 hours extra / grace period after the due date is usually available to overcome uploading
difficulties. This extra time should only be used to meet the emergencies and above
mentioned due dates should always be treated as final to avoid any inconvenience.
OTHER IMPORTANT INSTRUCTIONS:
DEADLINE:
Make sure to upload the solution file before the due date on VULMS.
Any submission made via email after the due date will not be accepted.
FORMATTING GUIDELINES:
Use the font style “Times New Roman” or “Arial” and font size “12”.
It is advised to compose your document in MS-Word format.
You may also compose your assignment in Open Office format.
Use black and blue font colors only.
RULES FOR MARKING
Please note that your assignment will not be graded or graded as Zero (0), if:
It is submitted after the due date.
The file you uploaded does not open or is corrupt.
It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint,
PDF etc.
It is cheated or copied from other students, internet, books, journals etc.
Note related to load shedding: Please be proactive
Dear students!
As you know that Post Mid-Term semester activities have started and load shedding
problem is also prevailing in our country. Keeping in view the fact, you all are advised to
post your activities as early as possible without waiting for the due date. For your
convenience; activity schedule has already been uploaded on VULMS for the current
semester, therefore no excuse will be entertained after due date of assignments,
quizzes or GDBs.
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