A farmer invested Rs 10,000 in a new irrigation system. If the expected annual cash inflow from the system is Rs 2,500 for the next five years, and the discount rate is 8%, what is the NPV? - IQ786

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A farmer invested Rs 10,000 in a new irrigation system. If the expected annual cash inflow from the system is Rs 2,500 for the next five years, and the discount rate is 8%, what is the NPV?

A farmer invested Rs 10,000 in a new irrigation system. If the expected annual cash inflow from the system is Rs 2,500 for the next five years, and the discount rate is 8%, what is the NPV?

Rs 1,000

Rs 1,500

Rs 2,000

None of these

Explanation

To calculate the NPV, we use the formula:

NPV = Initial Investment + (Cash Inflows / (1 + Discount Rate)^Year) - (Initial Investment)