Question

With project cost of Rs.300 lakh and cost of capital at 12%, the estimated profits over its lifetime of 5 years are Rs.10 lakh, Rs.10 lakh, Rs.30 lakh, Rs.40 lakh and Rs.50 lakh respectively. If the discount factors @ 12%, for the first five years are 0.89, 0.80, 0.71, 0.64 and 0.57 respectively, what is the net present value of project?

Q: With project cost of Rs.300 lakh and cost of capital at 12%, the estimated profits over its lifetime

spanNetpresentvalueNPVpresentvalueofinflowsndashinitialinvestmentspanCalculatingPVofinflowstableborder1cellspacing0cellpadding0tbodytrtdvaligntopwidth130spanspanInflowprofitstdtdvaligntopwidth123spanspanDiscountfactortdtdvaligntopwidth132spanspanPresentValuetdtrtrtdvaligntopwidth130span1000000tdtdvaligntopwidth123span089tdtdvalignbottomwidth132span890000tdtrtrtdvaligntopwidth130span1000000tdtdvaligntopwidth123span080tdtdvalignbottomwidth132span800000tdtrtrtdvaligntopwidth130span3000000tdtdvaligntopwidth123span071tdtdvalignbottomwidth132span2130000tdtrtrtdvaligntopwidth130span4000000tdtdvaligntopwidth123span064tdtdvalignbottomwidth132span2560000tdtrtrtdvaligntopwidth130span5000000tdtdvaligntopwidth123span057tdtdvalignbottomwidth132span2850000tdtrtrtdvaligntopwidth130spanspanTotaltdtdvaligntopwidth123spanspantdtdvalignbottomwidth132spanspan9230000tdtrtbodytablespanspanNPV9230ndash300lakh20770

A Rs.92.30 lakh

B Rs.140 lakh

C Rs.(-) 160.40 lakh

D Rs.(-)207.70 lakh

E Rs.392.30 lakh

Practice Next

Inflow (profits)	Discount factor	Present Value
10,00,000	0.89	8,90,000
10,00,000	0.80	8,00,000
30,00,000	0.71	21,30,000
40,00,000	0.64	25,60,000
50,00,000	0.57	28,50,000
Total		92,30,000

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