Homework Answers
Statement showing depreciation
| Year | Opening balance | Depreciation rates | Depreciation | Closing balance |
| 1 | 430000 | 33.30% | 143190 | 286810 |
| 2 | 286810 | 44.50% | 191350 | 95460 |
| 3 | 95460 | 14.80% | 63640 | 31820 |
| 4 | 31820 | 7.40% | 31820 | 0 |
Statement showing NPV
| Particulars | 0 | 1 | 2 | 3 | 4 | NPV |
| Cost of Machine | -430000 | |||||
| Earning before depreciation and tax | 200000 | 245000 | 84000 | 76000 | ||
| Depreciation | -143190 | -191350 | -63640 | -31820 | ||
| PBT | 56810 | 53650 | 20360 | 44180 | ||
| Tax @40% | 22724 | 21460 | 8144 | 17672 | ||
| PAT | 34086 | 32190 | 12216 | 26508 | ||
| Add: depreciation | 143190 | 191350 | 63640 | 31820 | ||
| Cash flow | -430000 | 177276 | 223540 | 75856 | 58328 | |
| PVIF @ 12% | 1.0000 | 0.8929 | 0.7972 | 0.7118 | 0.6355 | |
| PV | -430000 | 158282 | 178205 | 53993 | 37068 | -2452 |
A) NPV = -2452$
B) No, the firm should not purchase the asset since NPV is negative
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