The situation
A rollout costs ₹90 lakh now and saves ₹40 lakh at the end of each of the next three years. Use a 12% annual hurdle and no residual value.
Your task
Should the team approve it on the modeled NPV?
Reveal step-by-step solution
Set up the problem
Put the ₹90 lakh outflow at time zero and discount each year-end saving once per elapsed year.
Work through the numbers
PV of savings ≈ ₹35.71 + ₹31.89 + ₹28.47 = ₹96.07 lakh. NPV ≈ ₹6.07 lakh.
Interpret the result
It clears the hurdle under the assumptions. Break-even annual savings are about ₹37.47 lakh using the same timing.
What to remember
Align period and rate and include only incremental after-tax cash flows in an investment decision.