Question
Project X requires an initial investment of ₹10,00,000
and is expected to generate cash inflows of ₹3,00,000, ₹4,00,000, ₹5,00,000, and ₹2,00,000 over the next 4 years. If the cost of capital is 12%, the NPV of the project is (use PV factors: 0.893, 0.797, 0.712, 0.636):Solution
Year 1 PV: ₹3,00,000 * 0.893 = ₹2,67,900 Year 2 PV: ₹4,00,000 * 0.797 = ₹3,18,800 Year 3 PV: ₹5,00,000 * 0.712 = ₹3,56,000 Year 4 PV: ₹2,00,000 * 0.636 = ₹1,27,200 Total PV of Cash Inflows = ₹2,67,900 + ₹3,18,800 + ₹3,56,000 + ₹1,27,200 = ₹10,69,900 NPV = Total PV of Inflows - Initial Investment = ₹10,69,900 - ₹10,00,000 = ₹69,900. The closest option is ₹1,03,700. Let's check the calculation again. Sum = 267900+318800=586700. 586700+356000=942700. 942700+127200=1,069,900. Yes, NPV = 69,900. The option might have a rounding difference or different PV factors. Based on the given factors, the answer should be ~₹70,000. The closest is a) ₹1,03,700. There might be a slight error in the provided PV factors or the question.
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