Question #30864

An investment will have an initial outlay of Rs 100,000. It is expected

to generate cash inflows. Table 1.2 highlights the cash inflow for four

years.

Table 1.2: Cash inflow

Year Cash inflow

1

40000

2

50000

3 15000

4 30000

If the risk free rate and the risk premium is 10%,

a) Compute the NPV using the risk free rate

b) Compute NPV using risk-adjusted discount rate

to generate cash inflows. Table 1.2 highlights the cash inflow for four

years.

Table 1.2: Cash inflow

Year Cash inflow

1

40000

2

50000

3 15000

4 30000

If the risk free rate and the risk premium is 10%,

a) Compute the NPV using the risk free rate

b) Compute NPV using risk-adjusted discount rate

Expert's answer

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