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Gamma Inc plans to invest Rs.2,50,000 in a new project. The project life is 4 years with the following estimated profits after depreciation and before
Gamma Inc plans to invest Rs.2,50,000 in a new project. The project life is 4 years with the following estimated profits after depreciation and before tax:
•Year 1: Rs. 70,000
•Year 2: Rs. 90,000
•Year 3: Rs. 80,000
•Year 4: Rs. 60,000
The project depreciates at 20% on the initial cost. The corporate tax rate is 25%. Tasks:
1.Payback Period (PBP)
2.Accounting Rate of Return (ARR)
3.Net Present Value (NPV) at 11% cost of capital
4.Internal Rate of Return (IRR)
5.Discounted Payback Period (DPBP)
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