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JKL Enterprises is evaluating a project that requires an initial investment of 18,000 and has a life of 4 years. The companys required rate of
JKL Enterprises is evaluating a project that requires an initial investment of ₹18,000 and has a life of 4 years. The company’s required rate of return is 11%. The project will be depreciated on a straight-line basis. The net cash flows (before taxes) expected to be generated by the project and the present value (PV) factor (at 11%) are as follows:
Year | 1 | 2 | 3 | 4 |
Cash inflow (₹) | 5,000 | 5,000 | 5,000 | 5,000 |
PV factor (at 11%) | 0.901 | 0.812 | 0.731 | 0.659 |
Requirements:
- Compute the NPV of the project.
- Determine the payback period.
- Calculate the profitability index.
- Assess the IRR.
- Recommend whether JKL Enterprises should undertake the project.
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