Payback period is the period in which initial invetsment is recovered.
Year | Opening Bal | CF | Clsoing Bal |
1 | $ 1,01,00,000.00 | $ 49,00,000.00 | $ 52,00,000.00 |
2 | $ 52,00,000.00 | $ 17,00,000.00 | $ 35,00,000.00 |
3 | $ 35,00,000.00 | $ 17,00,000.00 | $ 18,00,000.00 |
4 | $ 18,00,000.00 | $ 17,00,000.00 | $ 1,00,000.00 |
5 | $ 1,00,000.00 | $ 17,00,000.00 | $ -16,00,000.00 |
PBP = Year in which least +ve CB + [ CB in that Year / CF of Next year ]
= 4 Years + [ 100000 / 1700000 ] Years
= 4 + 0.06
= 4.06 Years
Part B:
If PBP expected is 2Years, Reject the Project as Actual PBP is 4.06 Years.
Part C:
NPV = PV of Cash Inflows - PV of Cash Outflows
Year | CF | PVF @10.1% | Disc CF |
0 | $ -1,01,00,000.00 | 1.0000 | $ -1,01,00,000.00 |
1 | $ 49,00,000.00 | 0.9083 | $ 44,50,499.55 |
2 | $ 17,00,000.00 | 0.8249 | $ 14,02,407.69 |
3 | $ 17,00,000.00 | 0.7493 | $ 12,73,758.12 |
4 | $ 17,00,000.00 | 0.6805 | $ 11,56,910.19 |
5 | $ 17,00,000.00 | 0.6181 | $ 10,50,781.28 |
NPV | $ -7,65,643.18 |
Movi has negative NPV @10.1% Dusc Rate.
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