13 March 2008
this problem relates to capital budgeting. the project requires an up front investment ranging between RS.800000 and rs.1200000.how we are going to take this while evaluating the proposal.
13 March 2008
INITIAL CASH OUTFLOW OF RS.8 LAKHS TO RS 12 LAKHS WILL BE SHOWN AS OUTFLOW IN THE 1ST YEAR OR 0 YEAR .AFTER CONSIDERING SAME AS INITIAL CASH OUTFLOW ONLY,YOU HAVE TO START THE CAPITAL BUDGETING EXERCISE.THIS IS BECAUSE IT IS START UP OR UPFRONT FLOW.THE PAYBACK PERIOD OR NPV WILL BE ACCORDINGLY INFLUENCED.THERE IS NO ESCAPE.THIS IS COMMON FOR CAPITAL INTENSIVE PROJECTS UNLESS YOU CAN STAGGER THE SAME TO A MORE COMFORTABLE PERIOD LATER IN THE LIFE OF A PROJECT. R.V.RAO
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