Question

Management is considering the following investment project: Project Alpha

Project Alpha
Capital Outlay	$100,000
Cash Income p.a.	$59,000
Cash Expenses p.a. (other than tax)	19,000
Depreciation p.a.	10,000
Economic Life	10 years
Salvage Value	Zero
Tax Rate Payable (paid in year of income)	30%
Required Rate of Return	20%

Required: Calculate the following (you may use a financial calculator or software):

1. The Net Profit after Tax for all years and the Annual Cash Flow.
2. NPV, IRR, ARR, PBP

Answer 1

a) .corrlatm-4-Ndpeat-apude.andん,"al.cot qu 5000 9,000 to,… 30, 000 9, b00 21,00o 31,000 bas Discousted -tD 31,80041925 1299675 00,000 TRR @30% 3.615 S836.S l-1o 00,000 4163.S 20 → 29,961.5 ne34131 4163. 3413 IRF 30 -1.22

ARR Ar PAT pa 21,000 0 0,000 21>. = Amnual can fiaus ,00,000 31,000
Therefore Net profit after tax= $ 21000

AnnulA cash flows =$ 31000

NPV =$29967.5

IRR =28.78%

ARR =21%

PBP= 3.22years