A person is looking for investment opportunities.

He has about
Rs.50 million. Presently, he is concentrating on TWO PROJECTS:
(1) Weaving Mills & (2) Oil Plant.

Both projects require an investment of Rs.10 million each.

Preliminary information indicates that while Oil Plant would give a
constant return of Rs.3,300,000 per annum for the next four years,
the income from weaving Plant would be as follows:

Rs. Weaving
1 1,000,000
2 1,500,000
3 3,000,000
4 9,000,000

Supposing no other information is available, except that the normal

return on Investment from industrial projects are 12% per annum
and both projects have same life, which project would be accepted.

12%
PVIF PVIFA Present Value Interest Factor Annuity
1 0.893 0.893
2 0.797 1.690
3 0.712 2.402
4 0.636 3.038
5 0.567 3.605
Weaving Oil Plant
0 (10,000,000) 1.0000000 (10,000,000) (10,000,000) 1.0000000 (10,000,000)

1 1,000,000 0.89300 893,000 3,300,000 -

2 1,500,000 0.79700 1,195,500 3,300,000 -
3 3,000,000 0.71200 2,136,000 3,300,000 -
4 9,000,000 0.63600 5,724,000 3,300,000 -
14,500,000 9,948,500 - 10,025,400
4,500,000 (51,500) 25,400

NPV - EXEL (56,349) 23,253 NPV - EXEL 23,253

 3,300,000 3.0380 10,025,400
pvifa, 12%. 4 year

Differene of (2,147) due round-off