Firm A is considering a project A. The project involves cash outlay of ₹50,000 (t=0), working capital outlay of ₹20,000 (t=2), and is expected to generate Cash Flow After Tax (CFAT) of ₹12,000 per annum for 5 years exclu

CS Executive · Financial and Strategic Management · PYQS · December 2019
Firm A is considering a project A. The project involves cash outlay of ₹50,000 (t=0), working capital outlay of ₹20,000 (t=2), and is expected to generate Cash Flow After Tax (CFAT) of ₹12,000 per annum for 5 years excluding working capital release back and terminal value of 20%. What would be your advice to the company using Net Present Value approach, if its cost of capital is 10%?
(A) Accept the project.
(B) Either Accept or Reject it as NPV is zero.
(C) Reject the project.
(D) Information incomplete.

Answer & Explanation:

Correct Answer: Option (C)

Official answer key: (C).

Topics: Financial Management

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