GATE 2022 AR — Planning – Question 65
A project has initial outflow₹500000 at year 0, no flows in years 1–2, then outflow/inflow pairs: year 3 ₹50000/₹180000; year 4 ₹50000/₹220000; year 5 ₹50000/₹290000; year 6 ₹0/₹330000. At 12% annual discount rate, find NPV in rupees to two decimals.
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Correct answer: 3800.00 to 5020.00
Explanation
Net receipts are₹130000, ₹170000, ₹240000 and₹330000 at years 3, 4, 5, 6. For each receipt, its present value is the receipt divided by 1.12 raised to its year number. Add those four present values, then subtract the initial₹500000. The result is₹3940.22. Years 1 and 2 have no receipts but still contribute elapsed discounting time. Discounting the later receipts as if they occurred in years 1–4 would overstate value.
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