The problem involves calculating the Net Present Value (NPV) for a project based on its cash flows over 5 years, with an additional initial investment and a discount rate of 12%.

Here’s the breakdown:

• Initial investment at the beginning: Rs. 12,00,000
• Additional investment in year 1: Rs. 3,00,000
• Scrap value at the end of year 5: Rs. 1,20,000
• Cash inflows over 5 years:
  • Year 1: Rs. 2,00,000
  • Year 2: Rs. 3,00,000
  • Year 3: Rs. 6,00,000
  • Year 4: Rs. 8,00,000
  • Year 5: Rs. 3,00,000

The discount rate is 12%.

Steps to calculate NPV:

1. Calculate the present value of each cash inflow using the discount rate of 12%.
2. Calculate the present value of the scrap value in year 5.
3. Add these present values.
4. Subtract the initial and additional investment to determine the NPV.

I will now compute this.The Net Present Value (NPV) of the project is Rs. 91,531.48.

Since the NPV is positive, it indicates that the project is expected to generate more cash inflows than the total investment (including the additional investment in year 1), making it a viable investment.

Would you like more details or have any further questions?

Here are 5 related questions for further exploration:

1. How does the NPV change if the discount rate is increased to 15%?
2. What is the impact on NPV if the cash inflows are delayed by one year?
3. How would you calculate the Internal Rate of Return (IRR) for this project?
4. What happens to the project viability if the scrap value is reduced to Rs. 50,000?
5. How do we account for inflation when calculating NPV?

Tip: Always compare the NPV to other projects when deciding which one to invest in, as higher NPV projects tend to be more profitable.