The cash outflow and cash inflow of a certain project are given below.
Year cash outflow cash inflow
0 20000 0 0
1 50000 30000
2 0 50000
3 0 70000
4 0 120000
5 0 80000
The scrap value at the end of 5th year is Rs. 30000.
Cost of capital is 12%. Calculate NPV.
Present value of Rs.1 at 12% for 1st year – 0.893
2nd year – 0.797
3rd year – 0.712
4th year – 0.635
5th year – 0.567
Calculation of NPV
Year cash inflow present value of Rs.1 Present value
At 12% cash inflow
1 30000 0.893 26790
2 50000 0.797 39850
3 70000 0.712 49840
4 120000 0.635 76200
5 80000 0.567 45360
5 scrap value 30000 0.567 17010
Total cash in flow 255050
Less PV of initial investment – 244650
(200000+ 50000×0.893)= NPV =10400
