JCB, a manufacturer of agricultural and construction machinery, has the chance to buy a new factory today that will yield Rs 50 million after four years. Given an interest rate of 6%, what is the highest price JCB should pay for this project to be financially viable?

Explanation

To determine the maximum amount JCB should invest, we calculate the present value of Rs 50 million receivable in 4 years discounted at 6%. Using the formula PV = FV / (1 + r)^n, we get PV = 50,000,000 / (1.06)^4 = Rs 39,604,682. Thus, the project should not cost more than this amount.