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1) Sir in NPV questions, if nothing is mentioned about cost of capital then it is always assumed to be nominal cost of capital na and is it after tax cost of capital?
2) If a project is financially acceptable under NPV but let say it is not financially acceptable under ROCE, then will NPV prevail?
3)f a project is financially acceptable under NPV but let say it is not financially acceptable under IRR , then will NPV prevail?
4)f a project is financially acceptable under NPV but let say it is not financially acceptable under payback , then will NPV prevail?
5) Sir if nothing is mentioned regarding cash-flows in NPV question, then is it assumed to be nominal cash-flows?
6) In example 5 of chapter 8 OT, nothing was mentioned that first cash flow is on the 1st day of accounting period or is it on the last day of accounting period, so in such a case we will assume that it is on the first day of accounting period na?
1. Yes – we use the nominal after tax cost of capital.
2. No – that is up to the company to decide, but NPV is regarded as a better approach.
3. That cannot ever happen. IRR and NPV will give the same conclusion. (It is only when comparing projects that NPV is the approach even if IRR gives different).
4. Same answer as for 2.
5. Yes.
6. It makes no difference what you assume. It only makes a difference when there is tax involved. The first operating flows will occur one year after the initial investment, regardless of whether the initial investment is on the first or last day of an accounting period.
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