Question

10. The project X costs Rs.2,500 now and is expected to generate year end cash inflows of Rs.900, Rs.800, Rs.700,Rs.600, and Rs.500 in years 1 to 5. The opportunity cost of capital is assumed to be 15%. Find out the NPV of the project.

80

47.45

(60.57)

(96.86)

​

Answer 1

Answer:

Bznjzizjzjjskn, kada sjjsjx

Answer 2

Ques. 10. The project X costs Rs.2,500 now and is expected to generate year end cash inflows of Rs.900, Rs.800, Rs.700,Rs.600, and Rs.500 in years 1 to 5. The opportunity cost of capital is assumed to be 10%. Find out the NPV of the project.

Answer:

The required NPV of the project is $+Rs$ $225$.

Explanation:

Concept:

The difference between the current value of cash inflows and withdrawals over a period of time is known as net present value (NPV). To evaluate the profitability of a proposed investment or project, NPV is used in capital budgeting and investment planning.

$NPV =$ ⨊ $\frac{P}{(1+i)t} -C$

Given:

The project X is now costing Rs. 2,500

The project is anticipated to bring in cash at year-end amounts $=$ Rs. 900, Rs. 800, Rs. 700, Rs. 600, Rs. 500

Amounts respectively from year $= 1$ through $5$.

The opportunity cost of capital $=10$%.

To find:

We have to find the NPV of the project.

Solution:

Apply the formula of NPV which is,

$NPV =$ ⨊ $\frac{P}{(1+i)t} -C$

Where, $P$ stands for Net Period Cash Flow, $i$ for the discount rate (or rate of return), $t$ for the number of time periods, and $C$ for the initial investment.

$&\mathrm{NPV}=\frac{\text { Rs } 900}{(1+0.10)^{1}}+\frac{\text { Rs } 800}{(1+0.10)^{2}}+\frac{\text { Rs } 700}{(1+0.10)^{3}}+\frac{\text { Rs } 600}{(1+0.10)^{4}}$ $&+\frac{\text { Rs 500 }}{(1+0.10)^{5}}-\text { Rs 2,500 }$

$&=\left[\text { Rs } 900\left(\mathrm{PVF}_{1,0.10}\right)+\text { Rs } 800\left(\mathrm{PVF}_{2,0.10}\right)+R s 700\left(\mathrm{PVF}_{3,0.10}\right)\right.$ $&\left.+\text { Rs }$

$600\left(\mathrm{PVF}_{4,0.10}\right)\right]+\text { Rs }$ $500\left(\mathrm{PVF}_{5,0.10}\right)\right]-\text { Rs }_{2,500}$

$&=[\text { Rs } 900 \times 0.909+\text { Rs } 800 \times 0.826+\text { Rs } 700 \times 0.751$ $&+\text { Rs } 600 \times 0.683+\text { Rs } 500 \times 0.620]-\text { Rs } 2,500$

$=Rs$ $2,725-Rs$ $2,500$

$=+Rs$ $225$

#SPJ3