Plz solve - capital budgeting

535 views 4 replies

Swapnil

Student

183 Points Joined April 2012

Dear CCI friends....Plz solve this problem from Capital Budgeting " NPV " Method :

A Project costing Rs. 10,00,000 as life of 10 years at the end of which its scrap value is likely to be Rs. 1,00,000. The firms discount rate is 12%. The project is expected to yield an annual Profit After Tax Rs. 1,00,000. Depreciation being charged on Straight Line basis at 12% p.a. , the present value of Re. 1 received annually for 10 years is Re. 5.650 and the value of Re. 1 received at the end of 10th yer is Re.0.322. Ascertain the Net Value of the project and state whether you should go for the project ? Ans: NPV = 105000

( Friends Plz Plz solve this problem m not good in this chapter as am a self study student )

Replies (4)

PSPSPS

Practicing

1344 Points Joined September 2012

You have not mentioned the Tax rate, plds check the question Tax rate must have been gvn, Mention that Rate & I will gv the detailed solution for your Question

Swapnil

Student

183 Points Joined April 2012

Dear PSPSPS Thank You sooo much for your kind reply..... Bro Tax Rate was not given in the problem it is given as the same as i mentioned above. Plz provide me the solution by assuming tax rate as 50%, by this i'l try to do some more problems as precedure provided by you. I may not get the correct answer for this question but i can learn the procedure from you na.

Thank You .....

hiteshjain964@gmail.com

mumbai

59 Points Joined September 2013

Heybuddy the question seems to be wrong beacuse if you depriciate assets at 12% SLM method then the useful life of assets is just 8.5 years. 100/12 gives u 8.5