Question

    An investment project costs ₹1,00,000 and is expected

    to generate cash inflows of ₹30,000 per year for 5 years. If the cost of capital is 10%, determine whether the project is financially viable based on Net Present Value (NPV). Use PV factor of 10% for 5 years = 3.7908.
    A NPV = ₹5,000; Accept Correct Answer Incorrect Answer
    B NPV = ₹12,000; Accept Correct Answer Incorrect Answer
    C NPV = ₹10,000; Accept Correct Answer Incorrect Answer
    D NPV = ₹13,724; Accept Correct Answer Incorrect Answer
    E NPV = ₹9,500; Reject Correct Answer Incorrect Answer

    Solution

    NPV = ₹30,000 × 3.7908 – ₹1,00,000 = ₹1,13,724 – ₹1,00,000 = ₹13,724

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