Answer to Question #30864 in Economics of Enterprise for Faiz

Question

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