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The total cost of a project will be ` 1 0 million. This comprises ` 6 million in plant and machinery and ` 4 million
The total cost of a project will be million. This comprises million in plant and
machinery and million in gross working capital. The entire outlay will be incurred at the
beginning of the project.
The life of the project is expected to be years. At the end of years, the plant and machinery will
fetch a salvage value of million. The liquidation value of working capital will be million, its book
value.
The project will increase the revenue of the firm by million pa The increase in expenses on
account of the project will be million pa This includes all items of expenses other than
depreciation, interest, and taxes. The effective tax rate will be Plant and machinery will be
depreciated @ pa as per the reducing balance method. Calculate The NPV of the project at
DF
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