Question
An investment of ₹1,50,000 promises to pay ₹50,000
at the end of each of the next three years, plus ₹70,000 at the end of year 4. If the discount rate is 10% p.a., determine the net present value of this investment.Solution
PV of cash Inflows = ₹50,000 × 2.4869 = ₹1,24,345 ₹70,000 × 0.6830 = ₹47,810 Total = ₹1,72,155 NPV = PV of Cash inflows- PV of cash outflows = ₹1,72,155- ₹1,50,000= 22,155
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