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Initial cash outflows Property 35 M Rs. Capital 28 M Rs. Total 63M Rs.

Initial cash outflows Property 35 M Rs. Capital 28 M Rs. Total 63M Rs. Annual Cash Outflows O & M 1 M Rs. Labour 1.8 M Rs (5000Rs/labour)/month 30 labours. Milk 10.8 M Rs. 1000 ltr /day. 30 Rs / ltr. Flavors and Goods 3 M Rs.

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Initial cash outflows Property 35 M Rs. Capital 28 M Rs. Total 63M Rs.

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  1. Initial cash outflows Property 35 M Rs. Capital 28 M Rs. Total 63M Rs. Annual Cash Outflows O & M 1 M Rs. Labour 1.8 M Rs (5000Rs/labour)/month 30 labours. Milk 10.8 M Rs. 1000 ltr /day. 30 Rs / ltr. Flavors and Goods 3 M Rs. Transport 1 M Rs. Total 17.6 M Rs. Annual cash inflows 36 M Rs. 1000/ltr/day 100 / ltr

  2. Pay back period (Rs. In Million)

  3. Pay Back Period Required pay back period 5 year PBP = 3 + 63 – 58.1 77.1 = 3.06 years Since pay back period is less than required pay back period so Accept the project

  4. Net present value and profitability index (Rs. In Million)

  5. Net present value • Net Present value = (Sum of present value of cash inflows) – (sum of present of cash out flows) • NPV = 287.9 M - 136.16M • = 151.74 M • > 0 • Accept the project

  6. Profitability Index PI = (Sum of present value of cash inflows) / (sum of present of cash out flows) PI = 287.9 M / 136.16M = 2.11 > 1 Accept the project

  7. Internal rate of return (Rs. In Million)

  8. Internal rate of return Investor Required rate of return IR = 15% IRR = IL + ( IH - IL ) (PVL – ICO) PVL – PVH = 10% + (35% - 10%) (150.92 – 63) 150.92 – 54.83 = 32.87 % > IR Accept the project

  9. Acceptance and rejection of project We accept the project from NPV. Because decision criteria of net present value should be positive. Our NPV is positive so we accept the project.

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