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Calculate the payback period of the project

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Reference no: EM133110741

Akash Lid. is evaluating a new project for which it would need to invest Rs. 450 lacs initially and it is expected to generate cash flows as follows during its 5 year life- Rs. 110 lacs (Year 1), Rs. 150 lacs (Year 2), Rs. 190 lacs (Year 3), Rs. 140 lacs (Year 4) and Rs. 100 lacs (Year 5). Show with calculations whether the company should accept the project according to the NPV method if its cost of capital is 14%.

Also calculate- the payback period of the project and the discounted payback period. What is the 'payback period' and discuss its utility and drawbacks.

Reference no: EM133110741

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