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