Q2. Tulsian Ltd. provides you the following information: Rs. 6,00,000 1. Purchase Price of each Machine 2. Working Capital Rs. 3,00,000 3. Useful Life of each machine 5 years Estimated Salvage Value at the end of useful life Rs. 1,00,000 Actual Salvage Value realised at the end of useful life Rs 1,20,000 Method of Depreciation 4. 5. 6. Straight line 7. Tax Rate 30% 8. Earning before depreciation & tax: Year 1 Year 2 Year 3 Year 4 Year 5 Machine 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000 Machine X 1,00,000 2,00,000 3,00,000 12,00,000 Machine Y 5,00,000 4,00,000 3,00,000 2,00,000 Machine Z Suggest which machine should the company go for on the basis of: A. NPV method (Cost of Capital for the purpose is 10%) B. IRR method C. Profitability Index method (Cost of Capital for the purpose is 10%)
Q2. Tulsian Ltd. provides you the following information: Rs. 6,00,000 1. Purchase Price of each Machine 2. Working Capital Rs. 3,00,000 3. Useful Life of each machine 5 years Estimated Salvage Value at the end of useful life Rs. 1,00,000 Actual Salvage Value realised at the end of useful life Rs 1,20,000 Method of Depreciation 4. 5. 6. Straight line 7. Tax Rate 30% 8. Earning before depreciation & tax: Year 1 Year 2 Year 3 Year 4 Year 5 Machine 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000 Machine X 1,00,000 2,00,000 3,00,000 12,00,000 Machine Y 5,00,000 4,00,000 3,00,000 2,00,000 Machine Z Suggest which machine should the company go for on the basis of: A. NPV method (Cost of Capital for the purpose is 10%) B. IRR method C. Profitability Index method (Cost of Capital for the purpose is 10%)
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 8PA: Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the...
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