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A project requires an initial investment of Rs. 1,000 lakhs and is expected to generate the following cash flows over its life: Year Cash Flow
A project requires an initial investment of Rs. 1,000 lakhs and is expected to generate the following cash flows over its life:
Year | Cash Flow (Rs. in lakhs) |
1 | 250 |
2 | 270 |
3 | 290 |
4 | 310 |
5 | 330 |
The cost of raising capital is 13%, and the project assets will depreciate at 10% annually using the written-down value method. The salvage value at the end of five years is Rs. 200 lakhs.
Required:
- Calculate the net present value (NPV).
- Determine the internal rate of return (IRR).
- Compute the annual depreciation expenses.
- Evaluate the payback period.
- Assess the project's viability based on financial criteria.
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