10.

11.

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b) Ina firm if AVC
Where, 2 — Price AVC — Average variable cost AC — Average cost

c) Make a comparison between perfect competition and monopolistic competition. (4)
a) Estimate NDPmp, NNPmp and national income from the data given below. (7)
(All figures in Rs. 000, crores)

GDPmp = 850 Depreciation = 50 Net factor income from abroad = 210 Indirect Tax = 50

Subsidy = 40
b) Examine the circular flow in a two sector economy (3)
. a) What are the causes of inflation in an economy? (4)
b) How does a Central Bank control inflation? (6)
PART ^
(Answer any 4 questions. Each carries 10 marks)
A company is considering two projects A and B, each of them requires an initial (10)

investment of Rs.50 million. The expected cash inflows (in million) from these projects are

Year Project A Project B
1 11 38
2 19 22
3 32 18
4 37 10

If the cost of capital is 10 percent, which project should the firm invest in on the basis of NPV?

a) The following investment projects are available for a company and the initial outlay for the
projects are 50,000 each. Calculate payback period for the projects and suggest the most suitable
one. (6)

Year Cash flow

Project A Project B Project C

1 20000 15000 10000

2 15000 10000 15000

3 10000 25000 10000

4 10000 10000 10000

5 10000 5000 15000
b) Give any two advantages and disadvantages of payback period method? (4)
a) What are the steps involved in decision tree analysis? (8)
b) For what type of projects decision tree analysis is useful? (2)

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