NPV

r 10%
YEAR 0 -240
1 100 90.91
2 100 82.64
3 100 75.13
4 240 163.92
₹ 172.61 172.61

IRR
YEAR
0 -100000
1 10000 9090.9091
2 10000 8264.4628
3 10000 7513.148
4 10000 6830.1346
5 110000 68301.346

IRR 10%
NPV ₹ 0.00

MIRR
Financing rate 15%
cost of capital 12%
year CF PV FV
0 -2000 -2000 -4630.065
1 1000 1762.342
2 1000 1573.519
3 -4000 -2630.065
4 3000 3763.2
5 3000 3360
6 3000 3000 13459.06
-4630.065 13459.06

MIRR 19.46%
PROBLEM OF IRR SLIDE 17 PPT 2
r 10%
A B
0 -100 100
1 130 -130 for calculation of npv t
2

IRR 30% 30%

NPV ₹ 18.18 -₹ 18.18

PROBLEM 2 IRR
C
0 -100
1 230
2 -132
IRR 10%
IRR 20%
NPV ₹ 0.00

NPV vs IRR PPT 2

YEAR CF SMALL CF LARGE r
0 -10000 -25000
1 40000 65000
NPV ₹ 22,000.0 ₹ 27,000.0
IRR 300% 160%

INCREMENTAL CF -15000 25000

INCREMENTAL IRR 67%
INCREMENTAL NPV ₹ 5,000.00
LARGER PROJECT SHOULD BE SELECTED BECAUSE OF POSITIVE NPV

NPV vs PI
YEAR 1 2 3r
0 -20 -10 -10
1 70 15 -5
2 10 40 60
NPV ₹ 50.47 ₹ 35.28 ₹ 33.37
PI 3.52359693877551 4.5280612244898 4.33673469387755
RANK BASED OF PI 3 1 2
SELECT PROJECT 2 AND 3 (LARGER NPV WHEN 2 AND 3 ARE COMBINED SINCE 2 AND 3 GIVES BETT
PI rule
ACCEPT IF PI > 1
REJECT IF PI < 1

INCREMENTAL CF (LARGE - SMALL)

 0 -10
1 55
2 -30
INCREMENTAL NPV ₹ 15.19
INCREMENTAL PI 2.51913265306122
PROJECT 1 SHOULD BE SELECTED SINCE PI > 1
 IRR

for calculation of npv take small r not the IRR because IRR can be calcualted only when NPV=0

25%

12% PV 1 PV 2 PV 3

62.5 13.39286 -4.464286

7.971939 31.88776 47.83163
70.47194 45.28061 43.36735

NCE 2 AND 3 GIVES BETTER PI)

PV
 49.10714
-23.91582
25.19133
NPV Calculation NPV
Year
0 -240
1 100 90.9091 =D4/(1+10%)^C4
2 100 82.6446
3 100 75.1315
4 240 163.923
NPV= ₹ 172.61 172.608

IRR Calculation
PPT slide IRR
0 -100000
1 10000 9090.91
2 10000 8264.46
3 10000 7513.15
4 10000 6830.13
5 110000 68301

IRR 10%
NPV ₹ 0.00

problem 10 page 171

year A B
0 -1000 -2000
1 500 500
2 500 500
3 500 500

IRR 23% -13%

year A B
0 -1000 -2000 -2000
1 500 500 1000
2 500 500 1000
3 500 500 1000

23% -13% 23%

pg 173
0 -2700
problem 2 1 640
2 640
3 640
4 640
5 640
6 640
 7 640
8 640

PBP

pg173 problem 7
0 -325000 r
1 67000 59292.04
2 67000 52470.83
3 67000 46434.36
4 67000 41092.35
5 67000 36364.92
6 67000 32181.34
7 67000 28479.06

PV 296314.9
PI 0.911738

Mini case Bullock Mining

0 -950000000 r= 12%
1 190000000
2 215000000
3 225000000
4 285000000
5 275000000
6 235000000
7 205000000
8 165000000
9 -75000000

NPV=
 year
0
1
2
3
4
5
6

IRR

cum.CF DPBP Cum.PV CF

640 ₹ 581.82 ₹ 581.82 =F44/1.1^E44
1280 ₹ 528.93 ₹ 1,110.74 =F45/1.1^E45
1920 ₹ 480.84 ₹ 1,591.59 =F46/1.1^E46
2560 ₹ 437.13 ₹ 2,028.71
3200 ₹ 397.39 ₹ 2,426.10 ₹ 273.90
3840 ₹ 361.26 ₹ 2,787.37
 4480 ₹ 328.42 ₹ 3,115.79
5120 ₹ 298.56 ₹ 3,414.35

4.21875 DPBP 5.76

13%

Bullock Mining
0 -950000000
1 190000000 190000000
2 215000000 405000000
3 225000000 630000000
4 285000000 915000000
5 275000000 1190000000
6 235000000 1425000000
7 205000000 1630000000
8 165000000 1795000000
9 -75000000 1720000000
NPV= 139740017.606046
PBP= 3.12727272727273 3 years and 1.5 months
IRR= 16%
MIRR= 13%
PI= 1.14709475537479
yes we can accept the project
financing cost= 15%
cost of capital 12%

MIRR
CF PV of negative cash flo FV of positive cash flow
-2000 -2000 -4630.06
1000 1762.342 0
1000 1573.519 0
-4000 -2630.06 0
3000 3763.2 0
3000 3360 0
3000 3000 13459.06104
-4630.06 13459.06
30% MIRR 19%

2.90688387
0.16666667
1.19464246
0.19464246
MIRR 19.4642461

MIRR
year CF PV of outlay FV of inlay
0 -2000 -2000 -4630.06493
1 3000 5287.025 0
2 1000 1573.519 0
3 -4000 -2630.06493 0
4 3000 3763.2 0
5 5000 5600 0
6 3000 3000 19223.74441
-4630.06493 19223.74

4.151938
1.267774
0.267774
MIRR 26.77739 MIRR 27% 27%
 PV of CF
-950000000
169642857.1429 =L83/(1.12^K83)
171396683.6735 =L84/(1.12^K84)
160150555.758 =L85/(1.12^K85)
181122652.3454 =L86/(1.12^K86)
156042385.3226 =L87/(1.12^K87)
119058313.4767 =L88/(1.12^K88)
92731589.14406 =L89/(1.12^K89)
66640732.6166 =L90/(1.12^K90)
-27045751.87362

s and 1.5 months

Exercise 1 Rainbow Products
A year CF
0 -35000
1 5000
2 5000
3 5000
4 5000
5 5000
6 5000
7 5000
8 5000
9 5000
10 5000
11 5000
12 5000
13 5000
14 5000
15 5000

NPV -₹ 945.68
IRR 11.49%
PBP 7
Decision NO (-ve NPV)

C YEAR
0
1
2
3
4
5
6
7
8
9
10
11
proposal project
1 add a new window
2 update existing equipment
3 build a new stand
4 rent a larger stand

INCREMENTAL NPV

Lock heed tri star

@210 units

year
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977

@300units

year
1967
1968
1969
1970
1971
 1972
1973
1974
1975
1976
1977

Number of Units
number of quantity
revenue per year
revenue /aircraft
no of year
year
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
PB CUM

5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
55000
60000
65000
70000
75000

CF INFLOW CF OUT FLOW

-35000 @GROWTH4% 20% of outflow
5000.00 1000.00 =20%*H32
5200.00 =4%*H32+H32 1040.00 =20%*H33
5408.00 =4%*H33+H33 1081.60 =20%*H34
5624.32 =4%*H34+H34 1124.86 =20%*H35
5849.29 =4%*H35+H35 1169.86 =20%*H36
6083.26 =4%*H36+H36 1216.65 =20%*H37
6326.60 =4%*H37+H37 1265.32 =20%*H38
6579.66 =4%*H38+H38 1315.93 =20%*H39
6842.85 =4%*H39+H39 1368.57 =20%*H40
7116.56 =4%*H40+H40 1423.31 =20%*H41
7401.22 =4%*H41+H41 1480.24 =20%*H42

value of growing perpetuity

NPV=
irr
 A
B
C

investment year 1 year 2 year 3

-75000 44000 44000 44000
-50000 23000 23000 23000
-125000 70000 70000 70000
-1000 12000 13000 14000

-124000 58000 57000 56000

t investment Production cost Revenue

0 -100
1 -200
2 -200
3 -200 140
4 -200 -490 140
5 -490 560
6 -490 560
7 -490 560
8 -490 560
9 -490 420
10 420
-900 -2940 3360
production margin 420
revenue - cost

Net project Profit -480 NPV

investment-margin IRR

t investment Production cost Revenue

0 -100
1 -200
2 -200
3 -200 200
4 -200 -625 200
 5 -625 800
6 -625 800
7 -625 800
8 -625 800
9 -625 600
10 600
TOTAL -900 -3750 4800

Production margin 1050

Net profit 150

479.11 cost per unit= 12.5

79.8516667 total unit/no of year
1277.62667
16
6
t investment Production cost Revenue
0 -100
1 -200
2 -200
3 -200 319.40666667
4 -200 -998.145833333333 319.40666667
5 -998.145833333333 1277.6266667
6 -998.145833333333 1277.6266667
7 -998.145833333333 1277.6266667
8 -998.145833333333 1277.6266667
9 -998.145833333333 958.22
10 958.22
-900 -5988.875 7665.76
production margin 1676.885
revenue - cost

Net project Profit 776.885000000001 NPV

investment-margin IRR
DPV of CF cum. DPV

4464.29 4464.29
3985.97 8450.26
3558.90 12009.16
3177.59 15186.75
2837.13 18023.88
2533.16 20557.04
2261.75 22818.78
2019.42 24838.20
1803.05 26641.25
1609.87 28251.12
1437.38 29688.50
1283.38 30971.87
1145.87 32117.74
1023.10 33140.84
913.48 34054.32

CF INFLOW
RE-INVESTMENT @20%
4000.00 =H32-20%*H32 4000.00
4160.00 =H33-20%*H33 8160.00
4326.40 =H34-20%*H34 12486.40
4499.46 =H35-20%*H35 16985.86
4679.43 =H36-20%*H36 21665.29
4866.61 =H37-20%*H37 26531.90
5061.28 =H38-20%*H38 31593.18
5263.73 =H39-20%*H39 36856.91
5474.28 =H40-20%*H40 42331.18
5693.25 =H41-20%*H41 48024.43
5920.98 =H42-20%*H42 53945.41

50000.00 =4000/(0.12-0.04)
15000.00 =N44+G31 v=cf/(r-g)
15.43% =(4000/35000)+0.04 k=(cf/v)+g

NPV IRR
 -946 11.49
2500 12.86
15000 15.43

NPV IRR
₹ 25,461.91 35%
₹ 2,514.18 18%
₹ 34,825.76 31%
₹ 28,469.88 1208%

₹ 6,355.88 18%

total cash flow

-100
-200
-200
-60
-550
70
70
70
70
-70
420

₹ -584.05
-9.09%

total cash flow

-100
-200
-200
0
-625
 175
175
175
175
-25
600

NPV ₹ -274.38

total cash flow

-100
-200
-200
119.406666666667
-878.739166666667
279.480833333333 560
279.480833333333
279.480833333333
279.480833333333
-39.9258333333333
958.22

₹ 0.01
10.00%
 year CF
B 0 -35000
1 4500 4500
2 4500 9000
3 4500 13500
4 4500 18000
5 4500 22500
6 4500 27000
7 4500 31500
8 4500 36000
9 4500 40500
… … …
… … …

NPV 2500 =(4500/0.12)-35000

IRR 12.86% =4500/35000 cf/k-g 4500/0.12
PBP 8

yes

PBP

PBP DECISION to BUY?

7 NO
8 YES, But C Is better
8 YES
MACHINE 1 MACHINE 2
year YEAR CF
0 -4000 0 -1000
1 -100 1 -500
2 -100 2 -500
3 -100 3 -500
4 -100 4 -500
5 -100 5 -500
6 -100
7 -100 PVIFA(10%,10 6.1446 PVIFA(10%,5) 3.7908
8 -100
9 -100 NPV(A) ₹ -4,614.46 NPV(B) ₹ -2,895.39
10 -100 EAC(A) ₹ -750.98 EAC(B) ₹ -763.79

year CF(A) CF(a)

0 -35 -60
1 120 100
2 120 100
4 120 100
5 100
NPV ₹ 263.42 ₹ 256.99
EAB(A) ₹ 105.9239 =C21/2.4869 PVIFA(10,3) 2.4869
EAC(B) ₹ 81.07 =D21/3.1699 PVIFA(10,3) 3.1699

Solution : as per NPV machine a is good

As per EAC machine b is good A can be rejected
 A B
0 -35 -60 DEFAULT 10%
1 120 100
2 120 100
3 120 100
4 100

₹ 263.42 ₹ 256.99

A BCOZ HIGH NPV A

EAC - EQUIVALENT ANNUAL COSTS (EAC)

NPV=CF*PVIFA(r,n) 263.4=c* 2.487

CF of EAC = NPV/PVIFA (r,n) c=263.4/2.487

LOW EAC COST SHOULD BE SELECTED 105.9107

LOW EAC ===> B SHOULD BE SELECTED

CADILAC CLEANER CHEAPSTAKE CLEANER

0 -4000 -1000
1 -100 -500
2 -100 -500
3 -100 -500
4 -100 -500
5 -100 -500
6 -100
7 -100
8 -100
9 -100
10 -100

NPV -4614.46 -2895.39

LOWER NPV IS CONSIDERED TO BE SELECTED
C=NPV/PVIFA

EAC 750.9287 763.7545

LOW EAC SHOULD BE SELECTED

EAC FOR CHEAPSTAKE AIR CLEANER IS , 763.80 THEN WE SHOULD REJECT IT.
6.145 3.791
 pvifa table 10 % no of years 3

2.487
B
256.99=c*3.170

C=256.99/3.170

81.0694

===> B SHOULD BE SELECTED

10% DISCOUNT RATE

WE SHOULD REJECT IT.

CAPM CALCULATION
INCOME STATEMENT
Net Income Before
4,125Taxes 4,036 3,596 3,095 3,003
Provision for Income
1,142 Taxes 1,068 973 757 803

NIFTY VALUES
date infosys nifty 50 Market cap(cr.)
Mar-23 -4.01% 0.32% TCS 1,486,527.44
Feb-23 -3.01% -2.03% Infosys 670,913.81
Jan-23 1.69% -2.45% HCL Tech 444,403.36
Dec-22 -7.75% -3.48% Wipro 269,348.37
Nov-22 6.33% 4.14% LTIMindtree 151,715.61
Oct-22 8.79% 5.37% average 604,581.72
Sep-22 -5.33% -3.74%
Aug-22 -3.66% 3.50% company equity value
Jul-22 6.01% 8.73% total 670,913.81
Jun-22 -2.77% -4.85%
May-22 -4.08% -3.03% TAX CALCULATION
Apr-22 -17.8% -2.07% Net Income Before 4,125
Taxes 4,036 3,596
Mar-22 11.15% 3.99% Provision for Income
1,142
Taxes 1,068 973
Feb-22 -1.19% -3.15%
regression beta 0.709783
Jan-22 -8.03% -0.08%
Dec-21 10.22% 2.18% Davg/Eavg 0.09
Nov-21 2.69% -3.90% Dinf/Einf 0.10
Oct-21 -0.44% 0.30% Unlevered beta 0.67
Sep-21 -1.83% 2.84% Levered beta 0.72
Aug-21 5.96% 8.69%
Jul-21 1.88% 0.26%
Jun-21 13.42% 0.89%
May-21 2.91% 6.50%
Apr-21 -1.00% -0.41%
Mar-21 9.16% 1.11%
Feb-21 1.15% 6.56%
Jan-21 -1.33% -2.48%
Dec-20 14.16% 7.81%
Nov-20 3.71% 11.39%
Oct-20 5.19% 3.51%
Sep-20 8.58% -1.23%
Aug-20 -3.87% 2.84%
Jul-20 31.26% 7.49%
Jun-20 6.51% 7.53%
May-20 -3.42% -2.84%
Apr-20 11.54% 14.68%
Mar-20 -12.33% -23.25%
Feb-20 -5.70% -6.36%
Jan-20 6.13% -1.70%
Dec-19 5.00% 0.93%
Nov-19 1.57% 1.50%
Oct-19 -14.90% 3.51%
Sep-19 -1.14% 4.09%
Aug-19 2.68% -0.85%
Jul-19 8.42% -5.69%
Jun-19 -0.78% -1.12%
May-19 -1.81% 1.49%
Apr-19 1.01% 1.07%
total asset
debt(cr.) D/E
74,538.00 0.050142364
67,745.00 0.100974222
41,295.00 0.09292234
67,943.00 0.252249531
15,999.10 0.105454541
53,504.02 0.12

debt total value

67,745.00 738,658.81

AVG
3,095 3,003 3,571
757 803 949
TAX RATE 26.56%
CONSTANT GROWTH

Value = d/re

SINGLE GROWTH / GORDON GROWTH MODEL

Value = d(1+g)/(re-g) D = d(1+g) D - VALUE OF NEXT YEARS DIVIDEND
GORDON GROWTH MODEL d - dividend of current year
P = D/(re-g) P - current stock price

EXAMPLE

COST OF EQUITY / STAKE 10% CURRENT STOCK PRICE

YEAR GROWTH RATE DIVIDEND PER SHARE PV at t=0 PHASE
0 1.5 HIGH GROWTH
1 25% 1.88 1.70 HIGH GROWTH
2 20% 2.25 1.86 HIGH GROWTH
3 15% 2.59 1.94 HIGH GROWTH
4 10% 2.85 1.94 HIGH GROWTH
5 5% 2.99 1.86 HIGH GROWTH
6 5% 3.14 STABLE GROWTH
SUM 9.31

YEAR 6 ONWARDS STABLE GROWTH PHASE

TERMINAL VALUE = PV AT PERPETUAL DIVIDENDS 6TH YEAR ONWARDS

62.8

SINCE PV IS CALCULATED AT THE END OF FIFTH YEAR IT MUST BE DISCOUNTED BACK 5 YEARS
PV 39

INTRINSIC VALUE OF THE STOCK

INTRINSIC VALUE OF THE 48.28

SINCE THE INTRINSIC VALUE > CURRENT VALUE VENTURE SHOULD KEEP INVESTED IN THE COMPANY BECAUSE IT H
YEARS DIVIDEND

41

COMPANY BECAUSE IT HAS UPWARD POTENTIAL

YTM
seetlement date 8/1/2015
maturity date 8/1/2020
issue date 8/1/2020
rate 5%
price 80.00
redemption value 100
DCB 0.00

ytm 10.21%

PRICE AND YTM

seetlement date 8/1/2015 8/1/2015 8/1/2015 8/1/2015 8/1/2015 8/1/2015
maturity date 8/1/2020 8/1/2020 8/1/2020 8/1/2020 8/1/2020 8/1/2020
issue date 8/1/2010 8/1/2010 8/1/2010 8/1/2010 8/1/2010 8/1/2010
coupon rate 5% 5% 5% 5% 5% 5%
Present value 80.00 90.00 100.00 110.00 120.00 140.00
redemption value 100 100 100 100 100 100
DCB 0.00 0.00 0.00 0.00 0.00 0.00

YTM 10.21% 7.43% 5.00% 2.84% 0.90% -2.47%

YTM 0.1020614396796 0.074310216 0.05 0.028404705 0.009002998 -0.02467299

PV 80.00 90.00 100.00 110.00 120.00 140.00

TRENDLINE CHART
160.00
140.00
120.00
PRESENT VALUE

100.00
80.00
60.00
40.00
20.00
0.00
-0.04 -0.02 0 0.02 0.04 0.06 0.08 0.1 0.12
YTM
PRICE CALCULATION
Annual 1 2
Maturity(years) 10 10
Coupon rate 10% 1.10%
Coupon PMT 100 11
Par Value 1000 1000
YTM 8% 1%

PRESENT VALUE ₹ -1,134.20 PAYMENT 11

PRESENT VALUE ₹ -1,018.05
WACC

COST OF DEBT

COST OF EQUITY

COST OF PREFERENCE SHARE

DDM
GORDON GROWTH MODEL

XIRR (extended IRR)

XIRR is a financial metric that comes to the rescue when dealing with investments that have multiple cash flows. Un
traditional Internal Rate of Return (IRR), which assumes equal time gaps between cash flows, XIRR takes into accoun
dates of each inflow and outflow. It’s like IRR’s more sophisticated cousin, considering the nuances of investment tim
Here’s what you need to know about XIRR:
1. Purpose: XIRR helps calculate the rate of return for investments with varying cash flows, such as Mutual Funds.
as a way to measure how well your investment has performed over time.
2. Calculation: To compute XIRR, you’ll need the following information:
o Cash inflows: These include investments, dividends, and other positive cash events.
o Cash outflows: These involve withdrawals, redemptions, or any negative cash events.
o Exact dates corresponding to each cash flow.
3. Accuracy: Unlike the Compounded Annual Growth Rate (CAGR), which works well only when there are two cash
fixed duration, XIRR handles more complex scenarios. For instance, it accommodates features like Systematic Invest
(SIPs), dividend payments, and staggered investments.
4. Formula: XIRR is essentially the discount rate that balances the present value of all inflows with the present valu
outflows. It considers the specific timing of each investment. The formula involves solving for the rate that makes th
present value zero.
5. Example: Imagine you invested in a Mutual Fund with the following monthly contributions:
o ₹5,000 on 01 January 2030
o ₹5,000 on 01 February 2030
o ₹5,000 on 01 March 2030
o …and so on, until 01 December 2030
Let’s assume you sold your investment on 01 January 2033 for ₹80,000. The absolute return is 33.33%. But calculatin
becomes tricky due to varying durations. XIRR steps in, considering the exact investment dates and providing a more
return figure.
6. Result: XIRR expresses the rate of return as a percentage. 1. What Are Flotation Costs?
o Flotation costs are the expenses incurred by a publicly-traded company when it issues new securities (such as st
bonds). These costs include various fees:
 Underwriting fees: Paid to investment banks for managing the issuance process.
 Legal fees: Associated with legal documentation and compliance.
 Registration fees: Required for registering the securities with regulatory bodies.
 Audit fees: Ensuring financial transparency.
o Essentially, flotation costs are the transaction costs involved in raising capital through new equity or debt.
2. Why Do Flotation Costs Matter?
o When a company issues new equity (common stock), it incurs these costs.
o The difference between the cost of existing equity (already traded shares) and the cost of new equity (from the
the flotation cost.
o Flotation costs make new equity more expensive than existing equity.
3. Incorporating Flotation Costs into Cost of Capital:
o Companies often use a Weighted Average Cost of Capital (WACC) calculation to determine the optimal mix of fu
new equity and debt.
IRR
 ave multiple cash flows. Unlike the
ows, XIRR takes into account the exact
he nuances of investment timing.

ows, such as Mutual Funds. Think of it

s.

nly when there are two cash flows and a

atures like Systematic Investment Plans

nflows with the present value of

g for the rate that makes the net

utions:

urn is 33.33%. But calculating the CAGR

t dates and providing a more accurate

osts?
es new securities (such as stocks or

h new equity or debt.

ost of new equity (from the issuance) is

ermine the optimal mix of funding from

h new equity or debt.

ost of new equity (from the issuance) is

ermine the optimal mix of funding from

ut of future cash flows. This prevents

te companies. Here’s how it works:

using the beta of a publicly traded

es.
y method estimates the divisional
ojects.

of initiatives. Riskier projects increase a

the division you’re analyzing.

red beta and vice versa.

y capital?

ty capital due to its unique approach.

alculating an average cost of capital for

onsider the overall risk and return of

he same industry or have similar

d to estimate the divisional beta.
e rate, and the company’s beta.

sk assessment. Different divisions

distinguishing between divisions.

n a company. Each project can have its

may not be suitable for diverse projects.

Factors like industry dynamics, growth

nces.
l specifics and comparable firms,

ty capital due to its unique approach.

 Factors like industry dynamics, growth

nces.
l specifics and comparable firms,

ty capital due to its unique approach.

alculating an average cost of capital for

onsider the overall risk and return of

he same industry or have similar

d to estimate the divisional beta.
e rate, and the company’s beta.

sk assessment. Different divisions

distinguishing between divisions.

n a company. Each project can have its

may not be suitable for diverse projects.

Factors like industry dynamics, growth

nces.
l specifics and comparable firms,
1 PROJECT A PROJECT B
YEAR CF CUMULATIVE CF
0 -15000
1 10400 10400
2 5900 16300
3 2100 18400

0.77966101695
PAY BACK PERIO 1.77966101695

Since project A has shorter payback period than project B has, the company should cho

3 YEAR CF 1 CF 2 CF 3
0 -8000 -12000 -16000
1 5000 5000 5000
2 5500 5500 5500
3 6000 6000 6000
4 7000 7000 7000

₹ 9,966.693 ₹ 5,966.693 ₹ 1,966.693

PAYBACK PERIOD

4 YEAR CF 0% 10% 17%

0 -15100 -15100 -15100 -15100
1 3900 3900 3545 3333
2 3900 3900 3223 2849
3 3900 3900 2930 2435
4 3900 3900 2664 2081
5 3900 3900 2422 1779
6 3900 3900 2201 1520

NPV ₹ 8,300.00 ₹ 1,885.52 ₹ -1,102.18

0.87179487179 0.143510794872
PAYBACK 3.87179487179 5.143510794872 The project never pays back

5 YEAR CF
0 -27000 -27000
1 13100 12018.3486239
2 17200 14476.8958842
3 8400 6486.34123251

r 9%

NPV ₹ 5,981.59

IRR 22%
 IRR is greater than the discount rate thus accept the project

6 YEAR PROJECT A PROJECT B

0 -7300 -4390
1 3940 2170
2 3450 2210
3 2480 1730

IRR 18.24% 19.31%

7 YEAR CF CUMULATIVE CF PV OF CF
0 -325000
1 67000 67000 59292
2 67000 134000 52471
3 67000 201000 46434
4 67000 268000 41092
5 67000 335000 36365
6 67000 402000 32181
7 67000 469000 28479
296315
PI 0.912

PI is less than 1 , thus reject the project

8 YEAR alpha CF CUMULATIVE CF PV OF CF beta CF

0 -2700 -4100
1 1500 1500 1382 900
2 1300 2800 1104 2600
3 1100 3900 861 3200

3348
a) PI 1.239992318657
b) The company should accept Project Beta as the PI is greater compared to Project Alpha

13 YEAR CF CUMULATIVE CF PV OF CF
0 -65000000 -65000000
1 92000000 92000000 83636364
2 -11000000 81000000 -9090909

NPV 9545455
IRR 28.35%
 YEAR CF CUMULATIVE CF
0 -19000
1 12700 12700
2 6100 18800
3 5300 24100

1.03278688525
PAY BACK PER 2.03278688525

project B has, the company should choose project A

PV 1 CUMULATIVE PPV 2 CUMULATIPV 3 CUMULATIVE PV

-8000 -12000 -16000
4504.5045045 4504.5045045 4504.5045045 4504.505 4504.505 4504.505
4463.9233828 8968.4278873 4463.92338284 8968.428 4463.923 8968.428
4387.1482878 13355.576175 4387.14828781 13355.58 4387.148 13355.58
4611.116819 17966.692994 4611.11681902 17966.69 4611.117 17966.69

₹ 9,966.693 ₹ 5,966.693 ₹ 1,966.693

0.7830545455 0.691012 0.573489

1.7830545455 2.691012 3.573489

e project never pays back

 CUMULATIVE CPV OF CF

900 829
3500 2209
6700 2505

5543
1.352044573
ared to Project Alpha