Question: 01

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

1. Rs. 22,000
2. 18,000
3. 14,000
4. 15,000
5. 2,000

Compute cash flow for 5 years.

Calculate:

1. Payback period
2. Profitability Index
3. IRR
4. NPV( discount rate is 15%)
5. Discounted Payback
6. MIRR