Propose which investment plan, Financial Management

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Problem

There are two investment plans in the market whose details are given below based on which you need to decide which investment plan you need to select. Propose which investment plan you prefer and why?

Particulars

Part A

Part B

Investment in Rs. Million

3

2.7

Savings/ gain per year in Rs. Million

1.0

0.75

No. of years savings or gain would occur

5

5

Discount Rate

12%

12%

>>Plan A is a better investment plan because NPV of plan A is 0.6048 which is more than plan B which is equal to 0.0036
Formula: PV= S[1-(1+i)-5
                     -------------
                            I
And NPV= PV - i

Elaborate

  • Plan A is better investment
  • Calculations and above correct answer

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