Complex Investment Decisions : Analysis of Risk and Uncertainty

Risk analysis is one of the most complex aspect of capital investment decisions. Many different
techniques have been suggested and no single technique can be deemed as best in all situations.
The variety of techniques suggested to handle risk in capital budgeting fall into two broad
categories :
(a) Techniques that consider the stand-alone risk of a project,
(b) Techniques that consider the risk of a project in the context of the firm or in the
context of the market.
Below given various broad classification of risk mitigation techniques

Sensitivity Analysis
Scenario Analysis
Break Even Analysis
Analysis of Stand Alone Risk Hillier Model
Simulation Analysis
Techniques of Risk Decision Tree Analysis
Analysis
Analysis of Contextual Risk Corporate Risk Analysis

Market Risk Analysis

Sensitivity Analysis When some variables like sales quantity or price or cost of
investment deviates from the expected value , we are interested to
know what will happen to the project and its viability.
Scenario Analysis In sensitivity analysis typically one variable is varied at a time. In
scenario analysis several variables are varied simultaneously. Most
commonly three scenarios are considered: expected (or normal
scenario ), pessimistic scenario and optimistic scenario.
Break Even Analysis When we are interested to know how much should be produced
and sold at a minimum to ensure that project does not lose money ,
is an exercise called break even analysis.
Hillier Model Unrelated Cash Flow and Perfectly Correlated cash flow
Simulation Analysis Sensitivity Analysis indicates the sensitivity criterion of merit of
(NPV,IRR) to variations in basic factors . The information relating
to various factors of variability and their probability could be
generated by simulation analysis.
Decision Tree Is a pictorial representation in tree form ,which indicates the
Analysis magnitude , probability and inter relationships of all possible
outcomes from a project.
Sources,Measures and Perspectives on Risk

Sources of Risk

Project cash flows and profitability may be affected due to following risk
Project Specific Competitive Risk Industry Market Risk International
Risk Specific Risk Risk
Estimation error; Unanticipated Unexpected Unanticipated Exchange
Quality of actions of the technological change in macro- Rate Risk
management competitors risk; economic factors. Political Risk
Regulatory
changes

Measures of Risk

Risks refers variability- which is complex and multifaceted phenomenon . A variety of measures
have been used to capture different facets of risk. The more important one are :range , standard
deviation , coefficient of variation and semi-variance.

Range This is simplest measures of risk, the range of a distribution is the

difference between the highest value and the lowest value.
Standard Deviation The standard deviation of a distribution is defined as the square root of
the mean of the squared deviation , where deviation is the difference
between an outcome and the expected mean value of all outcomes. To
calculate the value of standard deviation , we provide weights to the
square of each deviation by its probability of occurrence.
Variance The square of standard deviation is called variance.
Coefficient of One problem with standard deviation (or variance ) is that it is not
Variation adjusted for scale. Coefficient of variation adjusts standard deviation
for scale. It is defined as Standard Deviation/ Expected Value.
Semi-variance There is yet another problem with standard deviation (or variance ). It
considers all deviations , positive as well as negative , from the expected
value in the same way. Investors are generally concerned only about
negative deviations , hence semi-variance is more suitable measures of
risk. It takes into account the values below the expected value of the
NPV.

With the help of following example we will explain various measures of risk.
In a Capital Project investment net present value has the following distribution.

Net Present Value (Rs in Lakh) Probability

400 0.3
1200 0.5
1800 0.2
The probability weighted NPV works out to :
3
Expected (NPV) = Σ piNPVi = 0.3 x 400 +0.5 X 1200 +0.2 x 1800
i=1
= 120+600+360
= 1080.

Range 1400 =(1800-400)

Standard σ = [(Σ pi (X-X)2] ½ where σ standard deviation pi is the
Deviation probability associated with i th value, Xi is the i th value
and X is the expected value.
The standard deviation in the above NPV distribution
presented above is:
Σ =[0.3(400-1080)2+0.5(1200- 1080)2+0.2(1800- 1080)2]1/2
½
= [138720+ 7200+103680]
½
= [249600]
= 499.5998

Variance The variance is 249600 = (499.5998)2

Coefficient of .4625 = 499.5998/1080
Variation
Semi-variance = 0.3(400 -1080)
2

= 0.3( 462400) = 138720.

Semi Standard Semi Standard Deviation is the square root of semi-
Deviation variance The semi-standard deviation for the investment
is :
1/2
372.45 = (138720)

Standard deviation is the most commonly used measure of risk in finance. The main reasons for
using deviation are as follows :
(a) If a variable is normally distributed , its mean and standard deviation contain all the
information about its probability distribution.
(b) If the utility of money is represented by a quadratic function (a function commonly
suggested to represent diminishing marginal utility of wealth ), then the expected utility
function of mean and standard deviation.
(c) Standard deviation is analytically easily tractable.
Use of Subjective Probability

For measuring expected value and dispersion of a variable , its probability distribution is
required. In some cases , it can be defined with fairly high degree objectivity on the basis of
past evidence. These can be referred as objective probability distribution. In most real life
situations , such objective evidence may not be available for defining probability distributions.
In such cases knowledgeable persons may pool their experience and judge to define the
probability distribution. Since there is high element of subjectivity in these distributions , such
distributions are generally referred to as subjective probability distributions.

Perspectives on risk

Stand Alone Risk:This represents the risk of a project when it is viewed in isolation.
Firm Risk : Also called corporate risk reflects the contribution of a project to the risk of the
firm.
Systematic Risk:This represents the risk of a project from the point of view of a diversified
investor. It is also called market risk.

SENSITIVITY ANALYSIS

Since the future is uncertain , investor may like to know what will happen to the viability of the
project when some variable like Income from Sales or investment deviates from its expected
value. In other words one may be interested to do what if analysis.
Avery popular method of assessing risk , sensitivity analysis has certain merits :
(i)It shows how robust or vulnerable a project is to changes in values of the underlying
variables.
(ii)It indicates where further work may be done. If NPV is higly sensitive to changes in some
factor, it may be worth while to explore how variability of that critical factor may be contained.

SCENARIO ANALYSIS

In scenario analysis , most commonly , three scenarios are considered : normal; pessimistic and
optimistic. It’s an improved approach over sensitivity because it considers variations in
several variables together.

Case Let -1:Example of Sensitivity Analysis

From the information presented below compute net present values of the two projects for each
of the possible cash flows, applying sensitivity analysis :

Project Super (Rs in 000) Project Deluxe (Rs in

000)
Initial Investment 40 40
Cash Flow estimates (t=15)
Worst Scenario 6 0
Moderate Scenario 8 8
Best Scenario 10 16
Required Rate of Return 10 percent 10 percent
Economic Life of the Project in years 15 15
Solution : Expected Cash Inflows

The NPV of each project , assuming a 10 per cent required rate of return ,
can be calculated for each of the possible cash flows. We know that Present
Value of an Annuity(PVIFA) OF Re 1.00 for 15 years @10% is
7.606.Multiplying each possible cash flow by PVIFA we get expected cash
flows given below:

Project X Project Y
PV NPV PV NPV
Worst 45636 5636 Nil (40,000)
Moderate 60848 20848 60848 20848
Best 76060 36060 121696 81696

How to select: Project X is less risky apparently because there is no chance

of suffering any losses but if the decision maker is risk oriented and want to
take high risk he may choose Y since it has possibility of giving high
return compared to Project X.

Assigning probabilities :We have shown above sensitivity analysis

provides more than one estimate of return of a project by showing worst,
moderate and best possible scenarios. This approach is better than any
single deterministic number provided by conventional analysis; it is superior
to single figure forecast as it gives more precise idea regarding variability of
the returns. The limitations of this approach is that it does not disclose the
chances of occurrence of these variations . To remedy these shortcomings of
sensitivity analysis, so as to provide a more accurate forecast , the
probability of the occurring variations should also be given.
Probability assignment to expected cash flows, therefore, would provide a
more precise measure of variability of cash flows. The concept of probability
is helpful as it indicates the percentage chance of occurrence of each
possible cash flows. If a cash flow has .30 probability of occurrence , it
means that the given cash flow is likely to be obtained in 3 out of 10
times (i.e. 30 per cent).Likewise if the cash flow has a probability of 1, it is
certain to occur . With zero probability , the cash flow estimate will never
materialize. Thus ,probability of obtaining particular cash flow estimates
would be between zero and one.
The quantification of variability of returns involves two steps .First
depending on the chance of occurrence of a particular cash flow estimate,
probabilities are assigned .The assignment of probabilities can be objective
and subjective .Objective probability refers to the assignment of a
probability which is based on a large number of observations, under
independent and identical situation , on the basis of the experience of
happening or not happening of the event. However objective probability is
not much use in capital budgeting situations because they do not satisfy the
requirement of independent observations repeated over time. They are
rather based on single event. Probability assignments which are not based
on objective evidence of a large number of trials of identical events are
called subjective or personal probability assignments. The assignment of
probabilities to cash flow estimates is subjective.

Expected Monetary Values: The second step is to estimate the expected

return on the project. The returns are expressed in terms of expected
monetary values. The expected value of a project is weighted average
return where weights are the probabilities assigned to the various expected
events , that is, the expected monetary values of the estimated cash
flows multiplied by probabilities.
The procedure for assigning probabilities and determining the expected
value is illustrated in the table below

Calculation Expected Values : After assigning probabilities

Project X Project Y
NPV Probability Probable NPV Probability Probable
of NPV NPV of NPV NPV
Occurrence Occurrence
Worst 5636 0.25 1409 (40,000) 0.25 (10000)
Moderate 20848 0.50 10424 20848 0.50 10424
Best 36060 0.25 9015 81696 0.25 20424
1.0 20848 1.0 20848

Case Let -2 Expected Monetary Values

The following information is available regarding the expected cash flows generated , and their
probability for company A. What is the expected return on the project? Assuming 10 per cent as
the discount rate , find out the present values of the expected monetary values.

Year -1 Year -2 Year -3

Cash Flows Probability Cash Flows Probability Cash Flows Probability
3000 .25 3000 .50 3000 .25
6000 .50 6000 .25 6000 .25
8000 .25 8000 .25 8000 .50

Calculation of Expected Monetary Values

Year-1 Year-2 Year-3

CF. Prob. Monetary CF. Prob. Monetary CF Prob. Monetary Values
Values Values
3000 .25 750 3000 .50 1500 3000 .25 750
6000 .50 3000 6000 .25 1500 6000 .25 1500
8000 .25 2000 8000 .25 2000 8000 .50 4000
5750 5000 6250

Calculation of Present Values

Years Monetary Values Discount Factor Present Values

Year -1 5750 .9090 =(1/1.1) 5226.75
Year -2 5000 .8264 =(1/1.1)2 4132
Year- 3 6250 .7512 =(1/1.1)3 4695
14053.75

Sensitivity Analysis can also be used to ascertain how change in key variables (say sales volume
, sales price, variable costs, operating fixed costs, cost of capital and so on) affect the expected
outcome .Primary objective of sensitivity analysis is to determine how sensitive the NPV is to
changes in any of the key variables and to identify which variable has the most significant
impact on the NPV . Clearly sensitivity analysis brings a good insight /feel to the decision
maker about the riskiness of the project.

Scenario Analysis
Scenario Analysis provides a useful insight into risk complextion of the proposed project. It’s
usefulness is limited in that it considers only a few discreet outcomes – though in practice it has
infinite number of possibilities.

Simulation
Is a statistical technique employed to have an insight into risk in a capital investment decision.
The technique applies predetermined probability distributions and random numbers to estimate
risky outcomes.
A simulation model is similar to sensitivity analysis as it attempts to answer what if questions.
The advantage in simulations is that it is more comprehensive than sensitivity analysis. Instead
of showing the impact on the NPV for change in one key variable at one point of the in
sensitivity analysis , simulation enables the distribution of probable values (of NPV), for change
in all the key variables, in one iteration /run only. Being so it provides more information and
better understanding about the risk associated with investment decisions to the finance
managers.
Case Let -3
Let us assume that the marketing department of Visuvious Ltd has developed the following
table (one for sale price another for sales volume ) for its new product , containing probability
and assigned random numbers.

Sale Price Probability Random Sales Volume Probability Random

(Rs) Numbers (Units) Numbers
10 .04 1-10 10,000 .04 1-10
11 .06 11-20 15,000 .05 11-20
12 .07 21-30 20,000 .06 21-30
13 .08 31-40 25,000 .09 31-40
14 .10 41-50 30,000 .11 41-50
15 .15 51-60 35,000 .23 51-60
16 .18 61-70 40,000 .22 61-70
17 .17 71-80 45,000 .12 71-80
18 .09 81-90 50,000 .05 81-90
19 .06 91-100 60,000 .03 91-100

Case Let -4

A company is considering selecting one of the two mutually exclusive projects A and B .the
relevant information required to evaluate the riskiness of the project is given below:

Data Pertaining to NPV Project A Project B

Expected Value 36000 50000
Standard Deviation 27000 32000
Coefficient of Variation 0.75 0.64

 On the basis of Standard Deviation alone Project B since larger ,it is more risky since
standard deviation is more in B than A..
 On the basis of Coefficient of Variation Project B would be considered less risky since
coefficient of variation is less here.
Here we can conclude that coefficient of variation is better measure of the uncertainty of cash
flow returns than the standard deviation. This is

Precise Measure of Risk : Standard Deviation and Coefficient of Variation

Assigning probabilities to cash flow estimates as a measure of variability of future returns,

represents a further improvement over sensitivity analysis , which itself superior to the method
which involved the estimation of future cash flows in the form of a single figure (deterministic).
The assignment of probabilities and the calculation of expected values, without doubt, takes into
account the risks in terms of variability in explicit terms in investment decisions. But it suffers
from a limitations to the extent that it does not provide the decision maker with a concrete
value indicative of variability and therefor risk. In other words for a more meaningful analysis
of risk in capital investment decisions , a more precise statistical measure is called for The
Standard Deviation (σ) and Coefficient of Variation (Ѵ) are two such measures which tell us
about the variability associated with expected cash flow in term sof degree of risk. Standard
deviation is an absolute measure which can be applied when the projects involve the same
outlay. If the projects compared involve different outlays, the coefficient of variation is the
correct choice, being a relative measure.

Standard deviation explained :

Risk Evaluation Approach

 Risk Adjusted Discounted Approach

 Certainty Equivalent Approach
 Probability Distribution Approach
 Decision Tree Approach

Risk Adjusted Certainty Equivalent Probability Decision Tree

Discounted Approach Distribution Approach
Approach Approach

It is a method to Here risk adjusted Here behavior of cash Pictorial presentation

incorporate risk in the factors that represent flows are important .Is in tree form ,which
discount rate the per cent estimated it independent cash indicates the
employed in cash inflow that flow , not affected by magnitude ,
computing the present investor would be cash flows in the probability and inter
values. satisfied to receive preceding or relationships of all
for certain rather than following year , in possible outcomes.
the cash inflows that case of dependent
are possible/uncertain cash flow this is not
for each year. the case.

Decision Tree Approach

A firm has an investment proposal , requiring an outlay of Rs 2,00,000 at present which is t=0.
The investment proposal has an economic life with no salvage value . In year 1, there is a 0.3
probability (30 per cent chance) that cash flow will be Rs 80,000; a 0.4 (40 per cent chance ) that
cash flow will be Rs 1,10,000 and a 0.3 probability (30 per cent chance) that the cash flow will
be Rs 1,50,000. In year 2 , the cash flow possibilities depend on the cash flow occurs in the
year 1.That is cash flow for the year 2 are conditional on the cash flow for the year 1.
Accordingly, the probabilities assigned with cash flow of the year 2 are conditional
probabilities. The estimated conditional cash flow and their associated conditional probabilities
are as follows:

Cash Flow –Rs 80,000 Cash Flow –Rs 1,10,000 Cash Flow –Rs 1,50,000
Cash Flows Probability Cash Flows Probability Cash Flows Probability
40,000 0.2 1,30,000 0.3 1,60,000 0.1
1,00,000 0.6 1,50,000 0.4 2,00,000 0.8
1,50,000 0.2 1,60,000 0.3 2,40,000 0.1

Solution1

Year Year 1 (t=1) Year 2(t=2) Path Expected Joint Expected

0(t=0) NPV Probability3 NPV4
2
@8%
Probabilities Cash Probabilities Cash
Flows Flows
0.2 40,000 1 -91640 .06 -5498.4
0.30 80.000 0.6 1,00,000 2 -40220 .18 -7239.6
0.2 1,50,000 3 2630 .06 -157.8
0.3 1,30,000 4 13270 .12 1592.4
0.40 1,10,000 0.4 1,50,000 5 30410 .16 4865.6
0.3 1,60,000 6 38980 .12 4677.6
0.1 1,60,000 7 76020 .03 2280.6
0.30 1,50,000 0.8 2,00,000 8 110300 .24 26472.0
0.1 2,40,000 9 144580 .03 4337.4
31645.40

Sum of these weighted NPVs is positive and therefore the project should be accepted.

Risk Adjusted Discount Approach (RADR):This is one of the simplest and most widely used
methods for incorporating risk into capital investment analysis . Under this method , the
amount of risk inherent in a project is incorporated in the discount rate employed in the
present value calculations. In case of a project which is trying to introduce an untried
product in an untried market Risk Adjusted Discount Rate will be much higher than in an
established market an established product by an established company who is expanding
capacity to exploit the opportunity in the market.
The use of a single rate of discount without considering the differing risk of various
projects would be logically inconsistent with the firm’s goal of shareholders’s wealth
maximization.
RADR presumably represent the differential risk in different classes of investments. The
rationale for using differing RADR for different projects is as follows. The rate of
discount or cost of capital (k) is the minimum acceptable required rate of return. It is the
rate at which the investor demand in providing capital to the firm for an investment
having a specified risk since such rate is available elsewhere in the economy on assets of
1
For detail computations please see accompanying Spread Sheet.
2
This Column shows two years cash inflow discounted @ 8% i.e in the first year 1/1.08 and in the second year
1/1.082 and then total cash inflow deducted from investment of Rs 2,00,000.
3
Two years probability factor of the cash flow has been multiplied.
4
Expected NPV is Expected NPV @ 8% multiplied by Joint Probabilities.
similar risk. Therefore , if the project earns less than the rates earned in the economy for
that risk, the shareholders will be earning less than prevailing rate for that risk level, and
the market value of the company’s shares will fall.
The cost of capital therefore represents the investors time preference for money for a
typical investment project. Thus the cost of capital is equivalent to the prevailing rate in
the market on that risk class of investment. A well accepted economic premise is that the
required rate of return should increase as the risk increases. Therefore greater the riskiness
of the project , the greater should be the discount rate and vice versa. The risk adjusted
discount rate is the discount rate which combines time as well as risk preference of
investors.
Accept Reject Rule : The decision could be taken on the basis of NPV or IRR method.
Here NPV decision will be calculated on the basis of RADR and it has to be positive. In
case of IRR is used , it has to be equated with risk adjusted discount rate. If IRR exceeds
the risk adjusted discount rate , the investment project would be accepted or else would be
rejected.
An example: In an investment Rs 1.00 lakh in a project the cash flow after taxes occurred
as : Rs 50000, 70000, and 75000 respectively. When discounted at risk free rate of of 8%
following NPV occurred :

Year Yr -0 Yr -1 Yr -2 Yr -3
Investment 100000
Cash Flow after Rs 50000 Rs 70000 Rs 75000
Taxes
Risk Free (1.08) 1.1664 1.2597
Discount Rate
Discounted 46296.30 60013.71 59537.99
Cash Flow

Present Value of Future Cash Flow at Risk Free Discount Rate:

Rs 165848=46296.30 +60013.71+59537.99
NPV of this Project Rs 65848 =( Rs 165848 –Rs 100000)

Application of RADR
Up on considering risk of the project and the financing costs the new risk adjusted discount
rate was arrived at 16.5%.The future cash flow of the project was discounted at this
discount rate and following results were obtained.

Year Yr -0 Yr -1 Yr -2 Yr -3
Investment 100000
Cash Flow after Rs 50000 Rs 70000 Rs 75000
Taxes
Risk Adjusted 1.165 1.3572 1.5812
Discount Rate
(RADR)
Discounted 42918.45 51576.78 47432.33
Cash Flow
Present Value of Future Cash Flow at Risk Adjusted Discount Rate (RADR):
Rs 141927.56=42918.45 +51576.78+47432.33
NPV of this Project with new discount rate is Rs 41927.56 =( Rs 141927.56 –Rs 100000)

Given the expected cash flows and estimated risk adjusted discount rate (RADR), the
projects expected NPV is positive and the project should be accepted.

Certainty Equivalent Approach:The certainty equivalent approach , as an

alternative to the risk adjusted rate method, overcomes some of the weaknesses of the
latter method. Under the former approach , the riskiness of the project is taken into
consideration by adjusting the expected cash flows and not the discount rate. This
method eliminates the problem arising out of the inclusion of risk premium in the
discounting process.
Steps involved :The incorporation of risk in investment decision on the basis of certainty
equivalent approach involves following steps.
Comparable Riskless Flow: Risk is incorporated in capital budgeting by modifying the
expected cash inflows. The first step , therefore involves the determination of the basis of
modifying the cash flows to adjust for risk. The risk adjustment factor is expressed in
terms of certainty equivalent coefficient . The certainty equivalent coefficient represents
the relationship between certain riskless cash flows and uncertain risky cash flows. Thus
the coefficient is equal to :
Riskless Cash Flow
Risky Cash Flows

Investment decisions are associated with risk as the future returns are uncertain in the
sense that the actual returns are likely to vary from estimates . If the returns could be
made certain , there would be no element of risk. It can reasonably be expected that the
investors would prefer a relatively smaller but certain cash flows than an uncertain ,
though slightly larger cash flows.How much less they would accept would depend on their
perception or utility preference with respect to risk. Therefore , depending on perception ,
the first step in the use of certainty equivalent approach is to ascertain riskless cash flows
comparable to expected cash flows stream from the project.
Suppose a project is expected to generate a cash flow amounting to Rs 30,000. Since this
involves a risk , a smaller but certain cash flow would be as acceptable to the firm as this
one.If we assume , on the basis of the perception of management with respect to risk ,the
firm would rank a certain cash flow of Rs 18000 as equal to uncertain cash flow of Rs
30,000. In other words a CERTAINTY EQUIVALENT Coefficient is 0.60 =(Rs 18000/ Rs
30000 ). This coefficient when multiplied by the risky cash flow , would generate the
riskless cash flows , i.e. 0.60 x Rs 30,000.
The coefficient is fractional amount which can assume a value between 0 and 1. There is
an inverse relationship between the degree of risk and the value of the coefficient , the
higher the risk is associated with the project cash flow , the lower is the coefficient.
Present Value Calculations: After the expected cash flows has been converted to certainty
equivalents , the second step under this approach is to calculate their present values. The
rate of discount would be risk free rate or the the rate which appropriately reflects the
time value of money. It is the same discount rate which is used for computing the present
values in the normal course of evaluating capital expenditure.This rate differs from the
rate used in the risk adjusted discount method.

Accept Reject Rule : The decision could be taken on the basis of NPV or IRR method.Here
NPV has to be positive. In case of IRR is applied it has to equated with risk free discount
rate. If r exceeds the risk free rate , the investment project would be accepted or else would
be rejected.

Evaluation:
 It is simple to calculate ;
 It modifies cash flows to incorporate risks, hence conceptually superior.
 But there is practical problems of implementation;
 It does not use probability estimation;
 It is subjective estimate hence it need to be objective; precise and consistent.

Example : We have taken the above example to shoe CE concept.In an investment Rs 1.00
lakh in a project the cash flow after taxes occurred as : Rs 50000, 70000, and 75000
respectively. When discounted at risk free rate of of 8% following NPV occurred :

Year Yr -0 Yr -1 Yr -2 Yr -3
Investment 100000
Cash Flow after Rs 50000 Rs 70000 Rs 75000
Taxes
Risk Free (1.08) 1.1664 1.2597
Discount Rate
Discounted 46296.30 60013.71 59537.99
Cash Flow

Present Value of Future Cash Flow at Risk Free Discount Rate:

Rs 165848=46296.30 +60013.71+59537.99
NPV of this Project Rs 65848 =( Rs 165848 –Rs 100000)

Here the company estimated that certainty equivalent cash flow for three years would be .
75; .70 and .65. We apply certainty equivalent cash flow approach .

The new cash flow will be

Year Yr -0 Yr -1 Yr -2 Yr -3
Investment 100000
Cash Flow after Rs 50000 Rs 70000 Rs 75000
Taxes
CE Coefficient .75 .70 .65
CE cash Flow 37500 49000 48750
Risk Free (1.08) 1.1664 1.2597
Discount Rate
Discounted 34722.22 42009.62 38699.69
Cash Flow

Present Value of Future Cash Flow at Risk Free Discount Rate:

Rs 115431.53=34722.22 +42009.62+38699.69
NPV of this Project Rs 15431.53=( Rs 115431.53 –Rs 100000)