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Nisha Sharma posted an Question
October 23, 2021 • 02:13 am
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30 points
30 points
- UGC NET
- Commerce
Cash nftows cash nflows odies volume estimate selling price ustration: final out the net present value for which a project requires an initial investment of rs.
Cash nftows Cash nflows OdieS Volume Estimate Selling Price ustration: Final out the Net Present value for which a project requires an initial investment of Rs. 25,000 and volves a net cash inflow of Rs. 12,000 each for 3 years. The cost of funds is 8% There is no scrap value. he present value of an annuity of Re 1 for 3 years at 8% per annum is Rs. 2.577. Solution: Calculation of Net Present Value
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Cash outflow = 25000 (initial investment) Cash inflow= 12000 Present value of cash inflow at 8% for 3 years= 12000*2.577 = Rs 30,924 We know that Net present value= total cash inflow- total cash outflow Substituting values: =30,924 - 25000 = Rs. 5924 We can see that NPV is positive. Thus, the project is feasible.