1.A company invests in a project costing 100 lakhs at @ WACC of 13% and having a useful life of 6 years. The pattern of future cash flows is as follows:

Year

1

2

3

4

5

6

C inflow

27

32

36

36

31

25

You are required to do the following:

1.Calculate NPV.

2.Calculate IRR

3.Sensitize WACC to 2% risk premium for a related business expansion and 4% for unrelated diversification and check the NPV for the same given value of cash flows

4.Compare your results in step 3 to IRR and state your observations