Discussion:Financial Management
From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Discussion Forum Index --> Consumer Questions --> Financial Management
| 28 October 2009 | |
| One of your friends, Ali has Rs. 5000 of which he can make either of the two investments offered by XYZ Corporation. On the basis of following information, you are requested to advise him which proposal he should prefer keeping in mind the NPV analysis. Support your decision with necessary calculation.
Proposal 1: This proposal is for the period of 4 years i.e. 2009 to 2012 and the initial investment is Rs. 5000. Cash inflows are given below:
Year Cash inflows (Rs.) 2009 2000 2010 3000 2011 4000 2012 3000
Other option is to invest Rs. 3000 in XYZ Corporation in the year 2009 which will provide him a steady cash inflow of Rs. 1000 for 4 years (year 2009-2012). And the remaining Rs. 2000 in ABC Corporation in the year 2009 which will provide him a steady cash inflow of Rs. 2000 for 4 years (year 2009-2012). Whereas, the commercial banks provide 10% return on PLS saving account. | |
| 28 October 2009 | |
| Wyasseur, this is a trick question. The answer is none of the above. ABC and XYZ are likely to bankrupt, bringing down the commerical bank. I'd bury it, and hope for better times next year. Put this down, and you'll get that "A" that the professor is waiting to give the smart student who figures this out. | |
| 28 October 2009 | |
| (I agree with Crow - the clue that the bank was already on the precipice is the fact that they are paying way above market rates for deposits - a sure sign of impending doom) | |
| 28 October 2009 | |
| Yeah, but are they too big to fail? Maybe there would be TARP money coming their way... | |
To join in on this discussion, you must first
log in.
