A company that provides infrastructure services to the government requests your assistance in evaluating the project proposal outlined below. The anticipated cash outflow for the undertaking is Rs. 20,00,000. The project’s duration is four years. The tax rate on corporations is 30%. The estimated cash inflows for the project are as follows:
Year 1
Cash inflows: 6,00,000
Year 2
Cash inflows: 5,00,000
Year 3
Cash inflows: 7,00,000
Year 4
Cash inflows: 7,00,000
You are required to evaluate the proposal using:
Payback period
Profitability index @ 10% discount rate.
Internal rate of return