2. A project requires an initial investment of Rs.5, 00,000. It is estimated to have a life of 6 years. The estimated net cash flows are as under: Year Net Cash Flow (Rs.) 1 60,000 2 80,000 3 1, 10,000 4 1, 20,000 5 1, 30,000 6 1, 00,000 Cost of capital is 10%. Calculate: a. Payback Period b. Net Present Value c. IRR of the project. Assume that the standard payback period is 4 years. Should the project be accepted as per each of the above measures? Why? [Discount factors at 10% are 0.909, 0.826, 0.751, 0.683, 0.621, 0.564 for 1 to 6 years
Answers
Answer:
paper pr dhyan do
Explanation:
The project should be rejected
CFAT PVF@10% PV Cumm CFAT PVF@6% Rs.
60,000 .909 54540 60,000 .943 56580
80,000 .826 66080 1,40,000 .889 71120
1,10,000 .751 82610 250000 .839 92290
1,20,000 .683 81960 370000 .792 95040
1,30,000 .621 80730 500000 .747 97110
1,00,000 .564 56400 600000 .704 70400
Total 422320 482540
NPV = PV of all cash inflow - PV of initial cash outflow
77680 = 422320 - 5,00,000
= 0
As per NPV projecy should be rejected.
Payback period -
5 year + 5,00,000 - 5,00,000/1,00,000
5 year + 0/1,00,000
The project should be rejected
IRR -
6 + ( - 17460)/ -17460 - (-77680) x ( 10-6)
6 + (-17460)/60220 x 4
6 - 1.1597
4.8403%