Sun Ltd plans to invest INR 500,000 in a project with the following cash flows: Cash...

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Sun Ltd plans to invest INR 500,000 in a project with the following cash flows: Cash flow after tax year 1 = INR 100,000 Cash flow after tax year 2 = INR 300,000 Cash flow after tax year 3 = INR 200,000 Cash flow after tax year 4 = INR 200,000 The discount rate is 5 per cent and the risk adjusted discount rate is 20 per cent. Determine the NPV of the project using the risk adjusted discount rate. Will your decision be the same if the risk adjusted discount rate is increased to 22 percent? Sun Ltd plans to invest INR 500,000 in a project with the following cash flows: Cash flow after tax year 1 = INR 100,000 Cash flow after tax year 2 = INR 300,000 Cash flow after tax year 3 = INR 200,000 Cash flow after tax year 4 = INR 200,000 The discount rate is 5 per cent and the risk adjusted discount rate is 20 per cent. Determine the NPV of the project using the risk adjusted discount rate. Will your decision be the same if the risk adjusted discount rate is increased to 22 percent?

Answer rating: 100% (QA)

SOLUTION The NPV of the project using the risk adjusted discount rate of 20 is INR 439102 Calculatio... View the full answer