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Project Cash Flow Analysis Techniques

The document calculates financial metrics like NPV, IRR, payback period and discounted payback period for a project with cash flows over 5 years. It finds an NPV of Rs. 25,750, IRR of 19%, non-discounted payback period of 5.4 years, and discounted payback period of 12.48 years.

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REJAY89
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6 views7 pages

Project Cash Flow Analysis Techniques

The document calculates financial metrics like NPV, IRR, payback period and discounted payback period for a project with cash flows over 5 years. It finds an NPV of Rs. 25,750, IRR of 19%, non-discounted payback period of 5.4 years, and discounted payback period of 12.48 years.

Uploaded by

REJAY89
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Example

The expected cash flows of a project


are:-
Year Cash Flows ( Rs.)
1 20,000
2 30,000
3 40,000
4 50,000
5 30,000
The cash outflow is Rs. 1,00,000
The cost of capital is 10%
Calculate the following:
a) NPV b) Profitability
c) IRR Index
d) Pay-back period e) Discounted Pay-back Period
Computation of NPV and PI
Year Cash Flows (Rs.) PV Factors@10% PV of Cash Flows (Rs.)

1
Computa
20,000
ion of
.909
NPV & PI18,180
2
3
t 40,000
30,000 .826
.751
24,780
30,040
4 50,000 .683 34,150
5 30,000 .620 18,600
Total Cash Inflow 1,25,750
Less: 1,00,000
Cash
Outflow
s
NPV 25,750
P.I. 1.2575
Computation of IRR
Year Cash PV Factors PV of Cash PV PV of
Flows @19% Flows Factors Cash
(Rs.) (Rs.) @18% Flows
Computati n of NPV & PI (Rs.)
1 20,000 o .84 16,800 .847 16,940
2 30,000 .706 21,180 .718 21,540
3 40,000 .593 23,720 .609 24,360
4 50,000 .499 24,950 .516 25,800
5 30,000 .42 12,600 .437 13,110
Total Cash Inflow 99,250 1,01,750
Less Cash 1,00,000 1,00,000
Outflows
NPV (-)750 (+)1750
Computation of IRR Contd..
Computation of non discounting pay-back period
Year Cash Flows (Rs.) Cumulative Cash Flow

1 20,000 20,000
2 30,000 50,000
3 40,000 90,000
4 50,000 1,40,000
5 30,000 1,70,000

Completed years + Required inflow *12


PBP = Inflow of Next year

= 3years+ (1,00,000-90,000) *12


50,000
= 5.4 years
Computation of discounted pay-back period
Year Cash Flows PV PV of Cash Cumulative
(Rs.) Factors@10% Flows (Rs.) Cash Flows
1 20,000 .909 18,180 18,180
2 30,000 .826 24,780 42,960
3 40,000 .751 30,040 73,000
4 50,000 .683 34,150 1,07,150
5 30,000 .620 18,600 1,25,750

Completed years + Required inflow


PBP = *12
= Inflow of Next year
3years+ (1,00,000-
73,000)*12
34150
= 12.48 years

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