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 earnings before tax from the proposed investment plan are as under. Year Earning before tax Rs. 22,000 18,000 14,000 15,000 25,000 Compute cash flow for 5 years. Calculate: Payback period Profitability Index IRR

EBK CONTEMPORARY FINANCIAL MANAGEMENT
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ISBN:9781337514835
Author:MOYER
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Chapter9: Capital Budgeting And Cash Flow Analysis
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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 earnings before tax from the proposed investment plan are as under.

Year Earning before tax
Rs. 22,000
18,000
14,000
15,000
25,000

Compute cash flow for 5 years.
Calculate:
Payback period
Profitability Index
IRR
NPV( discount rate is 15%)
Discounted Payback
MIRR

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