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Corporate Finance Project

This document summarizes the financial analysis of two potential projects, Projects X and Y. It provides the weighted average cost of capital, net present value, internal rate of return, payback period, and discounted payback period for each project. Project X has a weighted average cost of capital of 15.03%, an NPV of Rs. 46.75, an IRR of 36%, and a payback period of 1.72 years. Project Y has a weighted average cost of capital of 14.625%, an NPV of Rs. 59.07, an IRR of 29%, and a payback period of 1.95 years.

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TANUJA GOTTUMUKKALA
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20 views

Corporate Finance Project

This document summarizes the financial analysis of two potential projects, Projects X and Y. It provides the weighted average cost of capital, net present value, internal rate of return, payback period, and discounted payback period for each project. Project X has a weighted average cost of capital of 15.03%, an NPV of Rs. 46.75, an IRR of 36%, and a payback period of 1.72 years. Project Y has a weighted average cost of capital of 14.625%, an NPV of Rs. 59.07, an IRR of 29%, and a payback period of 1.95 years.

Uploaded by

TANUJA GOTTUMUKKALA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 6

CORPORATE FINANCE

PROJECT
z

BY
TANUJA GOTTUMUKKALA
z

PART 1
DESCRIPTION PROJECT X PROJECT Y
Financing mix: 01.02 03.05
Debt-equity
Cost of debt 9% 9%
Cost of equality 18% 18%
Weighted average cost 0.1503 0.14625
of capital

Weighted average cost of capital can be calculated by


{(weightage of debt*cost of debt)+(weightage of equity*cost of equity)}

So, as for Project X= {(0.33*0.09)+(0.67*0.18)} =0.0297+0.1206 =0.1503


Same for as Project Y= {(0.375*0.09)+(0.625*0.18)} = 0.03375+ 0.1125 =0.14625
ii) Capital Budgeting Techniques
z
 NPV of projects X and Y

 IRR of projects X and Y


YEAR PROJECT X PROJECT Y
(CASH FLOW) (CASH FLOW)
0 -120 -130
1 63 110
2 79 199
3 69 149
4 12 22
WACC 15% 14.63%
NPV ₹ 46.75 ₹ 59.07
1RR 36% 29%

Excel will be used to compute NPV using the formula =NPV (rate,
values of inflows)Projects X and Y are both implied by the same
implication. Excel will use the formula =IRR to calculate IRR (all the
values outflow and inflows)Projects X and Y are both implied by
the same implication.
ii)z Capital Budgeting Techniques
-Payback period of projects X and Y
YEAR Project X Cumulative Project Y Cumulative
(Cash Flows) Cash Flow (Cash Cash Flow
of Project X Flows) of Project Y

0 -120 -300
1 63 63.00 110 110
2 79 142.00 199 309
3 69 211.00 149 458
4 12 223.00 22 480
PAYBACK PERIOD

1.72 Years 1.95 Years


z Discounted payback period of projects X and Y
YEAR Project DF of PV of
X Projec Proje
(Cash t X i.e., ct X
Flows) 15%
z

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