Mr. Aslam is an army officer, who is going to be retired from the army in next few months. At his
retirement, he will receive Rs. 500,000 as gratuity. He has a plan to invest this money in any
business to earn some profit. For this purpose, he consults one of his friends for getting
suggestions and proposals regarding business plans with complete details. His friend, Mr. Asif
who is an expert in investment management, drafts for him two different business plans for the
period of next five years. Necessary information extracted from these drafts is given below:
Periods
retirement, he will receive Rs. 500,000 as gratuity. He has a plan to invest this money in any
business to earn some profit. For this purpose, he consults one of his friends for getting
suggestions and proposals regarding business plans with complete details. His friend, Mr. Asif
who is an expert in investment management, drafts for him two different business plans for the
period of next five years. Necessary information extracted from these drafts is given below:
Periods
Note: The required rate of return for plan-A is 12% and for plan-B is 15%.
Required:
a. Determine the time required by each project to recover its initial investment (3 marks).
b. Determine net present value for each plan (6 marks).
c. Analyze answers in (a) and (b) above and suggest a better plan for Mr. Aslam
(1 mark).
Required:
a. Determine the time required by each project to recover its initial investment (3 marks).
b. Determine net present value for each plan (6 marks).
c. Analyze answers in (a) and (b) above and suggest a better plan for Mr. Aslam
(1 mark).
