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Page No: 205-206.
Added on -2019-09-22
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Page No: 205-2061. Pay-back periodThe formula for calculating payback period-= Cash outflow/ cash inflow Following excel shows the calculations:YrsCash flowC.F.0-280,000-1100,000-180,0002100,000-80,0003100,00020,0004125,000145,0005150,000295,000Payback period =4+ 135,000/150,000=4.9 yrs.Thus, the payback period is 4.9yrs2. NPV The formula for calculating Net present value = Cash inflow- Cash outflow= 331,150 – 280,000= 51,150Following excel shows the calculations:YrsCash flowpvf @20%Cash flow0-280,0001100,0000.833833002100,0000.694694003100,0000.579579004125,0000.482602505150,0000.40260300331150Thus, the NPV is positive 51,1503. IRRFollowing excel shows the calculations:
YrsCash flow0-280,0001100,0002100,0003100,0004125,0005150,000IRR0.275Thus, the IRR is 0.2754. Factors which influence the decision making for selecting the project.The project should be accepted because of the following reasons:Net present value of the project is positive Internal rate of return exceed required rate of return Page: 1213.a. Present value of the proposed least payment Following excel shows the calculations:125,000230,000335,000440,000525,000PV116660.250Thus the PV from NPV function is 116,660.250b. Future valueFollowing excel shows the calculations:
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