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RST Inc. is choosing between two investment options. The companys cost of capital is 12% and tax rate is 26%. Other information related to both
RST Inc. is choosing between two investment options. The company’s cost of capital is 12% and tax rate is 26%. Other information related to both options are as follows:
Particulars | Option 1 | Option 2 |
Initial Cost | 3,500,000 | 4,200,000 |
Expected life | 5 years | 5 years |
Annual Income (before Tax & depreciation) | 1,000,000 | 1,200,000 |
Depreciation is charged on a straight-line basis. You are required to calculate: a. Internal Rate of Return (IRR) b. NPV c. Profitability index
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