4 A project requires an initial outlay of Rs. 1,00,000. It is expected to generate the cash inflows shown in table
| Table: Cash Inflows Year | Cash inflows |
| 1 | 50,000 |
| 2 | 50,000 |
| 3 | 30,000 |
| 4 | 40,000 |
Solution:-
Step 1: The average of annual cash inflows is computed as shown in table 8.16.
| Year | Cash flows |
| 1 | 50,000 |
| 2 | 50,000 |
| 3 | 30,000 |
| 4 | 40,000 |
| Total | 170000 |
Average = 170000/4=42500
Step 2: Divide the initial investment by the average of annual cash inflows
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