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GHI Enterprises is planning to undertake a project requiring an initial outlay of Rs.6,00,000. The project will generate the following cash inflows: Year Cash Inflows

GHI Enterprises is planning to undertake a project requiring an initial outlay of Rs.6,00,000. The project will generate the following cash inflows:

Year

Cash Inflows (Rs.)

1

2,00,000

2

1,80,000

3

1,50,000

4

1,20,000

5

1,00,000

The depreciation rate is 20% on the original investment, and the company’s tax rate is 28%.

You need to:

  1. Compute the Payback Period (PBP).
  2. Calculate the Accounting Rate of Return (ARR).
  3. Determine the Net Present Value (NPV) and Profitability Index (PI) at a cost of capital of 9%.
  4. Calculate the Internal Rate of Return (IRR).

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