Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A company is considering an investment of 650 lakhs in a new facility. The expected cash flows from the facility over the next seven years
A company is considering an investment of ₹650 lakhs in a new facility. The expected cash flows from the facility over the next seven years are as follows:
Year | Cash Flow (₹ in lakhs) |
1 | 160 |
2 | 170 |
3 | 180 |
4 | 190 |
5 | 200 |
6 | 210 |
7 | 220 |
The discount rate is 10%, and the facility has no salvage value at the end of its life. The depreciation method is 20% per year on a straight-line basis.
Required:
- Calculate the NPV of the investment.
- Determine the IRR.
- Compute the Profitability Index.
- Analyze the project's sensitivity to a 15% increase in initial investment.
- Evaluate the impact of different depreciation methods on the project's financial metrics.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started