Cash Inflows

Year
(Rs. in Crores)

0 Rs. (100.00)
1 Rs. 15.00
2 Rs. 28.00
3 Rs. 40.00
4 Rs. 30.00
5 Rs. 50.00

CALCULATION OF THE PAY BACK PERIOD

Cash Inflows CUMULATIVE

Year (Rs. in Crores) CASH FLOWS

0 Rs. (100.00)
1 Rs. 15.00 -85.000
2 Rs. 28.00 -57.000
3 Rs. 40.00 -17.000
4 Rs. 30.00 13.000
5 Rs. 50.00 63.000

PAY BACK PERIOD 3.57 Years

that's - 3 Years and 7 Months

CALCULATION OF THE DISCOUNTED PAY BACK PERIOD: DISCOUNT RATE

12%

Cash Inflows Discounting PV OF CASH CUMULATIVE OF PV

Year (Rs. in Crores) Factor FLOWS OF CASH FLOWS

0 Rs. (100.00) 1.000 -100.000

1 Rs. 15.00 0.893 13.393 -86.607
2 Rs. 28.00 0.797 22.321 -64.286
3 Rs. 40.00 0.712 28.471 -35.815
4 Rs. 30.00 0.636 19.066 -16.749
 5 Rs. 50.00 0.567 28.371 11.622

PAY BACK PERIOD 4.88 Years

that's - 4 Years and 11 Months

 Year BOOK VALUE OF FIXED ASSETS PROFIT AFTER TAX

1 Rs. 90,000.00 Rs.20,000.00

2 Rs. 80,000.00 Rs.22,000.00

3 Rs. 70,000.00 Rs.25,000.00

4 Rs. 60,000.00 Rs.30,000.00

5 Rs. 50,000.00 Rs.29,000.00

6 Rs. 35,000.00 Rs.27,000.00

AVERAGE Rs. 64,166.67 Rs. 25,500.00

ACCOUNTING RATE RETURN 39.74%

 Year Cash Inflows (Rs. in Discounting P. V.
Crores) Factor

0 Rs. (100.00) 1.000 Rs. (100.000)

1 Rs. 15.00 0.870 Rs. 13.043

2 Rs. 28.00 0.756 Rs. 21.172

3 Rs. 40.00 0.658 Rs. 26.301

4 Rs. 30.00 0.572 Rs. 17.153

5 Rs. 50.00 0.497 Rs. 24.859

Net Present Value Rs. 2.528

DISCOUNT RATE 15%

AN EXPERIMENT WITH EXCEL IN-BUILT NPV

FUNCTION
Cash Inflows (Rs. in
Year
Crores)
0 Rs. (100.00)

1 Rs. 15.00

2 Rs. 28.00

3 Rs. 40.00

4 Rs. 30.00

5 Rs. 50.00

Net Present =NPV(DIS_RATE,B14:B

Value 19)
 Rs.2.198
Is it CORRECT
NPV?

Correct NPV Rs. 2.528

Year Cash Inflows
(Rs. in Crores)

0 Rs. (1,500.00)

1 Rs. 225.00

2 Rs. 250.00

3 Rs. 350.00

4 Rs. 500.00

5 Rs. 680.00

6 Rs. 525.00

7 Rs. 375.00

IRR 17.00%
Year Cash Inflows (Rs.
in Crores)

0 Rs. (100.00)

1 Rs. 15.00

2 Rs. 28.00

3 Rs. 40.00

4 Rs. 30.00

5 Rs. 50.00

IRR 15.91%

Compounding
Cash Inflows (Rs. Factor @ 10% upto Terminal
Year
in Crores) terminal Point, 5 Value
Years
1 Rs. 15.00 1.4641 Rs. 21.96

2 Rs. 28.00 1.3310 Rs. 37.27

3 Rs. 40.00 1.2100 Rs. 48.40

4 Rs. 30.00 1.1000 Rs. 33.00

5 Rs. 50.00 1.0000 Rs. 50.00

Total Rs. 190.63

Therefore, MIRR is = 13.77%

YEAR CASH FLOWS - PROJECT A CASH FLOWS - PROJECT B

0 -120 -150

1 40 75

2 40 80

3 40 -85

4 40 75

5 40 80

6 40 65

NPV 44.46 46.23

IRR 24.29% 22.45%

PV of Cash
YEAR CASH FLOWS - PROJECT A Discounting Factor @12% flows

0 -120 1.0000 -120.00

1 40 0.8929 35.71

2 40 0.7972 31.89

3 40 0.7118 28.47

4 40 0.6355 25.42

5 40 0.5674 22.70

6 40 0.5066 20.27

Total 4.1114 Rs. 44.46

Annualized Annuity = 44.46/4.1114 Rs. 10.81

 PV of Cash
YEAR CASH FLOWS - PROJECT B Discounting Factor @12% flows

0 -150 1.0000 -150.00

1 75 0.8929 66.96

2 80 0.7972 63.78

3 65 0.7118 46.27

Total 2.4018 Rs. 27.01

Annualized Annuity = 27.01/2.4018 Rs. 11.24

Cost of capital 12.00%
RANK THE FOLLOWING PROJECTS ASSUMING THAT WE HAVE A CAPITAL
BUDGET OF Rs. 100 CRORES

PROJECTS COST OF PROJECTS NPV Profitability Index

P6 Rs. 10.00 Rs. 6.00 60.00%

P1 Rs. 20.00 Rs. 9.00 45.00%

P2 Rs. 40.00 Rs. 15.00 37.50%

P3 Rs. 30.00 Rs. 10.00 33.33%

P5 Rs. 80.00 Rs. 25.00 31.25%

P4 Rs. 70.00 Rs. 20.00 28.57%

RANK THE FOLLOWING PROJECTS ASSUMING THAT WE HAVE A CAPITAL

BUDGET OF Rs. 100 CRORES
PROJECTS COST OF PROJECTS NPV IRR

P1 Rs. 20.00 Rs. 9.00 15.25%

P2 Rs. 40.00 Rs. 15.00 14.75%

P3 Rs. 30.00 Rs. 10.00 16.00%

P4 Rs. 70.00 Rs. 20.00 18.00%

P5 Rs. 80.00 Rs. 25.00 17.50%

P6 Rs. 10.00 Rs. 6.00 15.00%