Question: A company is considering a project that requires an initial investment of 350 lakhs and will generate the following net cash flows: Year Net Cash

A company is considering a project that requires an initial investment of ₹350 lakhs and will generate the following net cash flows:

Year

Net Cash Flow (₹ in lakhs)

1

100

2

120

3

140

4

160

5

180

The discount rate is 14%, and the project has no salvage value at the end of its life. Depreciation is 10% on a Written Down Value basis.

Required:

  1. Calculate the NPV of the project.
  2. Determine the IRR.
  3. Compute the Discounted Payback Period.
  4. Analyze the project's sensitivity to changes in net cash flows (±10%).
  5. Evaluate the impact of different discount rates on the project’s NPV.

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