Q50531j Project M initially costs Rs. 50,000. It generates the following cash flows:

Year Cash In flows Present Value of Re 1 at 10%
  R s.  
1 18 ,000 0.90 9
2 16 ,000 0.82 6
3 14 ,000 0.75 1
4 12 ,000 0.68 3
5 10 ,000 0.62 1

Taking the cut off rate at 10%, suggest whether the project should be accepted or not. Use net present value method.

Question based on DIMS Solved Assignment and other course

Solution:

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Net Present Value = Total Present Value of Cash Inflows – Initial Investment

= Rs. 54,498 – Rs.50,000 = Rs. 4,498

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