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YZA Ltd. is evaluating a project with the following financials: Initial investment: Rs. 2,50,000 Project life: 5 years Expected annual profits before tax and after
YZA Ltd. is evaluating a project with the following financials:
- Initial investment: Rs. 2,50,000
- Project life: 5 years
- Expected annual profits before tax and after depreciation: Rs. 80,000, Rs. 85,000, Rs. 75,000, Rs. 70,000, Rs. 65,000
The depreciation rate is 12% on the original cost. The tax rate is 30%, and the cost of capital is 11%.
Required:
- Calculate the PBP and ARR.
- Compute the NPV and IRR.
- Determine the profitability index.
- Evaluate the impact of a 10% increase in annual profits on the project's NPV.
- Conduct a sensitivity analysis with a change in the tax rate to 35%.
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