Question
A firm is evaluating a project requiring an initial
investment of ₹100 lakh. The project is expected to generate cash inflows of ₹30 lakh annually for 5 years. If the discount rate is 10%, what is the Net Present Value (NPV)?Solution
NPV = ∑(CF / (1 + r)t) – Initial Investment Using PV factor for 5 years at 10% ≈ 3.791 NPV = ₹30 × 3.791 – ₹100 = ₹113.73 – ₹100 = ₹13.73 lakh
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