Fiancial mangament

A Reliance Energy Company is considering two mutually exclusive projects. Both require an initial investment of Rs. 50,000 each and have a life of five years. The cost of capital of the company is 10% and tax rate is 50%. The depreciation is charged on straight line method. The estimated net cash inflows (before deprecation and tax) of the two projects are as follows: Year Project A Project B 1 Rs. 20,000 Rs. 30,000 2 22,000 27,000 3 28,000 22,000 4 25,000 25,000 5 30,000 20,000 Which project should be accepted as per NPV and IRR method? b) What is the CAPM approach for calculating the cost of equity ? What is the difference between this approach and the constant growth approach ? Which one is better ? Why ?; A Reliance Energy Company is considering two mutually exclusive projects. Both require an initial investment of Rs. 50,000 each and have a life of five years. The cost of capital of the company is 10% and tax rate is 50%. The depreciation is charged on straight line method. The estimated net cash inflows (before deprecation and tax) of the two projects are as follows: Year Project A Project B 1 Rs. 20,000 Rs. 30,000 2 22,000 27,000 3 28,000 22,000 4 25,000 25,000 5 30,000 20,000 Which project should be accepted as per NPV and IRR method? b) What is the CAPM approach for calculating the cost of equity ? What is the difference between this approach and the constant growth approach ? Which one is better ? Why ?

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