Firm purchased plant Rs. 250,000; foundationcost paid 15,000 and installation charges Rs.38,000. The projected sales of the companyfor the first year is 400,000 and this sales willgrow by 5% per annum for next five years.However, Company's EBIT would be near 15%of sales and Interest expense 5% of sales.Corporate tax rate is at 30% and Cost ofcapital 15%.Calculate the Discounted Payback Period.

Information Provided: Tax rate = 30% Cost of capital = 15% EBIT = 15% of sales Interest expense = 5%…

Answered: Calculate the Discounted Payback…

Business

Finance

Calculate the Discounted Payback Period.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 11P

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Concept explainers

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Capital Asset Pricing Model

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Question

Firm purchased plant Rs. 250,000; foundation
cost paid 15,000 and installation charges Rs.
38,000. The projected sales of the company
for the first year is 400,000 and this sales will
grow by 5% per annum for next five years.
However, Company's EBIT would be near 15%
of sales and Interest expense 5% of sales.
Corporate tax rate is at 30% and Cost of
capital 15%.
Calculate the Discounted Payback Period.

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