Questions on Capital Budgeting 1. A company is considering an investment proposal to install new milling controls at a cost of Rs 50,000. The facility has a life expectancy of 5 years and no salvage value. The tax rate is 35 per cent. Assume the firm uses straight line method of depreciation and the same is used for tax purposes also. The estimated cash flows before depreciation and tax from the investment proposal are as follows: Year 12345 CFBT Rs 10,000 Rs 10,692 Rs 12,769 Rs 13,462 Rs 20,385 Compute payback period, Average rate of return, IRR, NPV at 10 per cent discount rate and Profitability index at 10 per cent discount rate