Compute the net present value for a project with a net investment of 1,00,000 and net cash flows year one is 55,000; for year two is 80,000 and for year three is 15,000. Further, the company's cost of capital is 10%?

[PVIF @ 10% for three years are 0.909, 0.826 and 0.751]

To calculate the Net Present Value (NPV) of the project, we use the formula:

\[
\text{NPV} = \sum \left( \frac{\text{Cash Flow}_t}{(1 + r)^t} \right) - \text{Initial Investment}
\]

Where:
- \(\text{Cash Flow}_t\) is the cash flow in year \(t\),
- \(r\) is the discount rate (cost of capital), and
- \(t\) is the year.

Given:
- Initial Investment = 1,00,000
- Cash Flow Year 1 = 55,000
- Cash Flow Year 2 = 80,000
- Cash Flow Year 3 = 15,000
- Cost of Capital = 10%
- Present Value Interest Factors (PVIF) @ 10%:
  - Year 1: 0.909
  - Year 2: 0.826
  - Year 3: 0.751

### Step-by-Step Calculation

1. **Year 1**:  
   \[
   \text{PV of Year 1 Cash Flow} = 55,000 \times 0.909 = 49,995
   \]

2. **Year 2**:  
   \[
   \text{PV of Year 2 Cash Flow} = 80,000 \times 0.826 = 66,080
   \]

3. **Year 3**:  
   \[
   \text{PV of Year 3 Cash Flow} = 15,000 \times 0.751 = 11,265
   \]

4. **Total Present Value of Cash Flows**:  
   \[
   \text{Total PV} = 49,995 + 66,080 + 11,265 = 1,27,340
   \]

5. **Net Present Value (NPV)**:  
   \[
   \text{NPV} = 1,27,340 - 1,00,000 = 27,340
   \]

### Conclusion:
The Net Present Value (NPV) of the project is **₹27,340**.

Would you like more details or have any questions?

Here are some related questions to consider:
1. How would changes in the cost of capital affect the NPV?
2. What is the significance of a positive NPV for investment decisions?
3. How do you calculate the Internal Rate of Return (IRR) for this project?
4. What if the cash flows were uneven or had a different pattern?
5. How does NPV compare with other investment appraisal methods like Payback Period or Profitability Index?

**Tip:** NPV is a powerful tool because it accounts for the time value of money, ensuring that future cash flows are accurately valued in today's terms.

Learn how to calculate Net Present Value (NPV) for a project with an initial investment of ₹1,00,000 and cash flows of ₹55,000 in year 1, ₹80,000 in year 2, and ₹15,000 in year 3. The cost of capital is 10%. Follow step-by-step calculations using NPV formula and present value interest factors (PVIF).

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