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mistake in may 2010 suggested answer of fm cap budgting
in may 2010 fm paper one question from cap budgting calculate npv discounted payback period and irr. 2 machine is given under consideration one life is 5 year and 2 ki life 6 year. This the mutually exclusive proposal. As per npv technique when mutually exclusive proposal is given and life of the proposal under consideration is nt same and both cash inflow and outflow is given than proposal having highes equvijant npv will be chosen bt in suggested only npv calculated nt equvilant npv plz help me ki kya main galat hun ya institute se mistake hui hai?
Replies (2)
In my opinion, u are right..it should not be NPV.
Dear Friend,
In my opinion, when there are two mutually exclusive events,and also when the life of the projects are not same, for deciding the project, we should ascertain that by (i) Equated Annual Benefit Method or (2) Equated Cost Method. If there are sunk costs or no cost data available we can use EAB Method.
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