Answer:
The correct option is (d) Rs 189,003.
Step-by-step explanation:
Note: See the attached excel file for the calculation of the NPV of the project.
In the attached excel file, the following are used:
Original investment = Rs 3,000,000
Year 1 Income = Original investment * 10% = Rs 3,000,000 * 10% = Rs 300,000
Year 2 Income = Original investment * 15% = Rs 3,000,000 * 15% = Rs 450,000
Year 2 Income = Original investment * 20% = Rs 3,000,000 * 20% = Rs 600,000
In addition, we also use:
Discounting factor = 1 / (1 + r)^n ................ (1)
Where;
r = Company’s cost of capital = 12%, or 0.12
n = each relevant year 1, 2, or 3.
Substituting the values into equation (1), we have:
Discounting factor = 1 / (1 + 0.12)^n
From the attached excel file, the NPV of the project is Rs 189,003.
Therefore, the correct option is (d) Rs 189,003.
