Question: GHI Ltd. is evaluating a project that requires an initial investment of Rs.4,00,000. The project will yield the following annual cash flows: Year Cash Flow

GHI Ltd. is evaluating a project that requires an initial investment of Rs.4,00,000. The project will yield the following annual cash flows:

Year

Cash Flow (Rs.)

1

1,20,000

2

1,50,000

3

1,00,000

4

90,000

5

80,000

The project will be depreciated using the straight-line method. The tax rate is 28% and the required rate of return is 12%.

Required:

  1. Calculate the Payback Period.
  2. Determine the ARR.
  3. Compute the NPV.
  4. Calculate the Profitability Index.
  5. Determine the IRR.

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