## Answers

Cash flow year 0=-2000000

Cash flow Year 1=600000

Cash Flow Year 2=850000

Cash Flow Year 3=900000

Cash Flow Year 4 =700000

Pay Back Period Years before recovery + Cost not covered in that year/ Cash flow for that year =3 + (600000+850000+900000-2000000)/900000 =3.39 years

IRR using financial calculator

CF0=-2000000,CF1=600000;CF2 =850000;CF3=900000;CF4=700000 CPT IRR =7.97%

NPV =PV of Cash Flows-Investment =600000/1.10+850000/1.1^2+900000/1.1^3+700000/1.1^4-2000000 =402226.62

PI =1+NPV/Investment =1+402226.62/2000000=1.20

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