A company is considering an investment proposal to install new milling machine. The project will cost Rs.50,000. The facility has a life expectancy of 5 years and no salvage value. The company tax rate is 40%. Firm uses straight-line method for depreciation. The estimated earning before tax from the proposed investment plan are as under. Year Earning before tax 1 22,000 2 18,000 3 14,000 4 15,000 5 25,000 Compute cash flow for 5 years Calculate: Payback period Profitability Index IRR NPV( discount rate is 15%)
Q No.1
A company is considering an investment proposal to install new milling machine. The project will cost Rs.50,000. The facility has a life expectancy of 5 years and no salvage value. The company tax rate is 40%. Firm uses straight-line method for
Year Earning before tax
1 22,000
2 18,000
3 14,000
4 15,000
5 25,000
Compute cash flow for 5 years
Calculate:
- Payback period
- Profitability Index
IRR NPV ( discount rate is 15%)
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