Alpha Enterprises is considering a project with the following details:
•Initial Investment: Rs.5,00,000
•Project Life: 4 years, no salvage value
•Annual profits (after depreciation but before tax): Rs. 1,40,000, Rs. 1,70,000, Rs. 1,30,000, Rs. 1,10,000
•Depreciation: 25% of the initial cost
•Tax Rate: 25%
•Required calculations:
1.Payback Period (PBP)
2.Average Rate of Return (ARR)
3.Net Present Value (NPV) at 10% cost of capital
4.Internal Rate of Return (IRR)
5.Profitability Index (PI)