Question
Raman Ltd. is evaluating a new machine costing ₹60 lakhs with a useful life of 5 years. The expected annual operating cash inflows (after-tax) are ₹18 lakhs. The machine will be depreciated straight-line to zero but will have a salvage value of ₹10 lakhs at the end of 5 years. The company’s tax rate is 30%, and the cost of capital is 12%. The present value factors (12%) for 5 years are: Year 1: 0.893, Year 2: 0.797, Year 3: 0.712, Year 4: 0.636, Year 5: 0.567 PV of ₹1 after 5 years = 0.567 Cumulative PV factor = 3.605 What is the NPV of the project?
More Capital Budgeting Questions
- In accordance with Ind AS 2, explain how the item should be measured: One of Company's product lines is beauty products, particularly cosmetics such as lip...
- ABC Ltd. is evaluating a project requiring an initial investment of ₹50 lakhs. The project is expected to generate cash flows of ₹15 lakhs per year for the...
- A project requires an investment of Rs. 10,00,000. It generates annual cash inflows of Rs. 3,00,000 for 5 years. If cost of capital is 10%, should the proj...
- Which of the following is a non-discounting technique of capital budgeting?
- Project requires initial investment of ₹10 lakhs. Annual cash inflows: Year1-₹2L, Year2-₹3L, Year3-₹4L, Year4-₹5L. Cost of capital 10%. NPV? (PV factors: 0...
- Which of the following is/are examples of capital expenditure?
- The discount rate that makes the NPV of a project equal to zero is called the:
- Which financing strategy balances liquidity risk and cost by matching short-term needs with short-term funds and permanent working capital with long-term f...
- ABC Ltd. is evaluating two projects. Project A requires ₹50 lakhs investment and offers IRR of 14%. Project B requires ₹40 lakhs and gives IRR of 12%. The ...
- At the end of the accounting year, all the nominal accounts of the ledger book are:
Hey! Ask a query
Please enter email id
The email must be a valid email address.
Please enter Mobile Number
Please enter valid Mobile Number
Please enter your Doubt