Question
A project requires ₹4 lakh initial investment and
yields ₹1 lakh annually for 5 years. If the cost of capital is 10%, what is the Net Present Value (NPV)?Solution
NPV = PV of inflows – Initial Investment PVIFA @10%, 5 years = 3.791 PV = ₹1 lakh × 3.791 = ₹3.791 lakh NPV = ₹3.791 – ₹4 = ₹0.209 lakh
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