Question

A company requires an initial investment of Rs. 40,000. The essential net cash flows are as follows:

Year 1 2 3 4 5 6 7 8 9 10

Net cash flow (Rs.) 7000 7000 7000 7000 7000 8000 10000 15000 10000 4000

Using 10% as the cost of capital (rate of Discount), determine the following:

a. Pay-back period

b. Net present value

c. Internal rate of return​

Answer 1

Payback period = 5.625 years

NPV = Rs. 8,961

IRR = 14.7%