Determine pay back period and net present value, Corporate Finance

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Determine pay back period and net present value?

A company is considering two projects with the subsequent cash flow streams:

Year

Project A

(Rs.)

Project B

(Rs.)

Discount

Factor at 10%

-2,50,000

10,000

1,00,000

1,20,000

1,00,000

-2,50,000

1,30,000

1,00,000

80,000

10,000

1.0000

0.9091

0.8264

0.7513

0.6830

Determine if the cost of capital to the firm is 10%, rank the two projects in terms of

(a) pay back period; and (b) net present value.

Which of these criteria will you make use for selecting a project and why?

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