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Assignment 1

The document calculates financial metrics like NPV, IRR, payback period and discounted payback period for a project with cash flows over 5 years. It finds an NPV of Rs. 25,750, IRR of 19%, non-discounted payback period of 5.4 years, and discounted payback period of 12.48 years.

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REJAY89
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12 views

Assignment 1

The document calculates financial metrics like NPV, IRR, payback period and discounted payback period for a project with cash flows over 5 years. It finds an NPV of Rs. 25,750, IRR of 19%, non-discounted payback period of 5.4 years, and discounted payback period of 12.48 years.

Uploaded by

REJAY89
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Example

The expected cash flows of a project


are:-
Year Cash Flows ( Rs.)
1 20,000
2 30,000
3 40,000
4 50,000
5 30,000
The cash outflow is Rs. 1,00,000
The cost of capital is 10%
Calculate the following:
a) NPV b) Profitability
c) IRR Index
d) Pay-back period e) Discounted Pay-back Period
Computation of NPV and PI
Year Cash Flows (Rs.) PV Factors@10% PV of Cash Flows (Rs.)

1
Computa
20,000
ion of
.909
NPV & PI18,180
2
3
t 40,000
30,000 .826
.751
24,780
30,040
4 50,000 .683 34,150
5 30,000 .620 18,600
Total Cash Inflow 1,25,750
Less: 1,00,000
Cash
Outflow
s
NPV 25,750
P.I. 1.2575
Computation of IRR
Year Cash PV Factors PV of Cash PV PV of
Flows @19% Flows Factors Cash
(Rs.) (Rs.) @18% Flows
Computati n of NPV & PI (Rs.)
1 20,000 o .84 16,800 .847 16,940
2 30,000 .706 21,180 .718 21,540
3 40,000 .593 23,720 .609 24,360
4 50,000 .499 24,950 .516 25,800
5 30,000 .42 12,600 .437 13,110
Total Cash Inflow 99,250 1,01,750
Less Cash 1,00,000 1,00,000
Outflows
NPV (-)750 (+)1750
Computation of IRR Contd..
Computation of non discounting pay-back period
Year Cash Flows (Rs.) Cumulative Cash Flow

1 20,000 20,000
2 30,000 50,000
3 40,000 90,000
4 50,000 1,40,000
5 30,000 1,70,000

Completed years + Required inflow *12


PBP = Inflow of Next year

= 3years+ (1,00,000-90,000) *12


50,000
= 5.4 years
Computation of discounted pay-back period
Year Cash Flows PV PV of Cash Cumulative
(Rs.) Factors@10% Flows (Rs.) Cash Flows
1 20,000 .909 18,180 18,180
2 30,000 .826 24,780 42,960
3 40,000 .751 30,040 73,000
4 50,000 .683 34,150 1,07,150
5 30,000 .620 18,600 1,25,750

Completed years + Required inflow


PBP = *12
= Inflow of Next year
3years+ (1,00,000-
73,000)*12
34150
= 12.48 years

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