📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!

    Question

    A project requires an investment of Rs. 10,00,000. It

    generates annual cash inflows of Rs. 3,00,000 for 5 years. If cost of capital is 10%, should the project be accepted based on NPV? (PV factor of annuity of Rs. 1 for 5 years @10% = 3.791).
    A NPV = Rs. 1,26,000 (Accept) Correct Answer Incorrect Answer
    B NPV = Rs. (1,26,000) (Reject) Correct Answer Incorrect Answer
    C NPV = Rs. 1,37,300 (Accept) Correct Answer Incorrect Answer
    D NPV = Rs. (1,37,300) (Reject) Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    PV of inflows = 3,00,000 × 3.791 = Rs. 11,37,300. NPV = 11,37,300 – 10,00,000 = Rs. 1,37,300 (Accept). 

    Practice Next
    More Capital Budgeting Questions
    ask-question