What is the rate of return of a business which requires an initial investment of Rs 1 00000 with an annual expected cash inflow of Rs 30000 for 5 years?
Emily Baldwin 
To calculate the payback period you can use the mathematical formula: Payback Period = Initial investment / Cash flow per year For example, you have invested Rs 1,00,000 with an annual payback of Rs 20,000. Payback Period = 1,00,000/20,000 = 5 years.
How do you calculate annual cash flow for a project?
Subtract your total cash outflows from your total cash inflows to determine your yearly cash flow. A positive number represents positive cash flow, while a negative result represents negative cash flow. Continuing with the example, subtract $139,000 from $175,000 to get $36,000 in positive yearly cash flow.
What is the net present value of a project with a cost of $100 000 that generates cash flows of $40 000 over the next three years and the required rate of return is 15 %?
This method is considered to be the best method for evaluation of a project because it provides importance to time value of money. Therefore, the net present value for the project is -$8,670.
How do you calculate postback profitability?
Post Payback Profitability = Cash inflow (Estimated life – Pay-back Period) Accounting Rate of Return This is the amount of profit, or return, that an individual can expect based on an investment made.
Is annual cash flow the same as profit?
The Difference Between Cash Flow and Profit The key difference between cash flow and profit is that while profit indicates the amount of money left over after all expenses have been paid, cash flow indicates the net flow of cash into and out of a business.
What is the NPV of a project that costs $100 000?
NPV = PV of inflows – required investment= $45,000 = $45,000 [7.1429 – 4.8212] = $45,000 [2.3217] – $100,000 = $4,473.44 8.
Why do we use WACC to discount cash flows?
What is WACC used for? The Weighted Average Cost of Capital serves as the discount rate for calculating the Net Present Value (NPV) of a business. It is also used to evaluate investment opportunities, as it is considered to represent the firm’s opportunity cost. Thus, it is used as a hurdle rate by companies.
What is payback profitability formula?
Post Payback Profitability = Annual Cash Inflow (Estimated Life— Payback Period) The above formula is used if there is even cash inflow. In the case of uneven cash inflows, the following formula is used. Post Payback Profitability = Total Annual Cash Flows – Initial Investment.
