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Will you Sell Your HEN or Not ?

HARISH RACHAMDUGU ( CA FINAL) (120 Points)

14 October 2010

Hi Friends,

I Have a simple question. Please answer me this question. You have a Hen which lays a golden egg daily and its value is Rs. 1000. It lays 365 golden eggs in the year. Now my question is If I give you Rs. . 365000 now itself, Will you sell the Hen to me or not?

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9 Replies

bobby (CA FINAL- cleared 1st group) (586 Points)
Replied 14 October 2010

I WONT SELL BCOS, IF IT LIVES 4 MOR DAN 1 YR, I LL GET MOR THAN 365000

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Sumit (PR) (336 Points)
Replied 14 October 2010

Assuming you mean that the HEN's life is one year exactly.. i will first calculate the P.V. of all 365 golden eggs and the residual cash flow on scrap value,if any...and considering today's value of gold - 19600per 10 gram...if it is more(and i m sure it is much more) than rs 365000..then definitely i will take the HEN...

SImple Capital Budgeting Decision to expand one's wealth :)

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Prannoy bhargava (ojfdpojpo) (30 Points)
Replied 14 October 2010

dude its much f a tricky question rather than being theoritical. i surely cannot sell the HEN to you as u yourself is the owner.

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Amit Singh (Chartered Accountant) (270 Points)
Replied 14 October 2010

I think Mr. Prannoy bhargava is absolutelty right.

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Amit Singh (Chartered Accountant) (270 Points)
Replied 15 October 2010

This is really tricky can u share answer

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Samiksha (Articles) (345 Points)
Replied 15 October 2010

if you are doing the ca i will better not to sell it to you because u may not be having time to feed it.

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HARISH RACHAMDUGU ( CA FINAL) (120 Points)
Replied 20 October 2010

Hi guys. The answer for this is Both. U can sell because

1. U have to protect from thieves as it is laying golden eggs. So it is security problem.

2. The hen may die before one year. so U may not getting 365000 wen it dies before 1 year.

3. If the gold rates decline u may not get 365000.

U need not sell because

1. The hen may live more than one year

2. I will be famous through media. If i have any business my sales of that business grow .

3. The NPV of 365000 at the year end is less than 365000.

4. I can show live casts in News channels of hatching of eggs by my hen and i can earn money.

Here wat is important is Whether u attempt the question or not is important with ur reasonings. In the same fashion in our CA exams also if we attempt the questions with right reasonings and supportings we will be awarded marks. This is i want to convey with this question.