a) | PV of cash outflow | = | 3,10,000 | |||||
Salvage value | = | 18000 | ||||||
No of years | = | 4 | ||||||
Depreciation amount | = | (3,10,000-18000)/4 | ||||||
= | 73000 | |||||||
PV of cash inflow | ||||||||
1 | 2 | 3 | 4 | |||||
Incremental cash revenue | 1,55,000 | 1,55,000 | 1,55,000 | 1,55,000 | ||||
(-) | Depreciation | 73000 | 73000 | 73000 | 73000 | |||
Net cash revenue after dep | 82,000 | 82,000 | 82,000 | 82,000 | ||||
(-) | Tax rate (40%) | 32800 | 32800 | 32800 | 32800 | |||
Cash revenue after tax | 49,200 | 49,200 | 49,200 | 49,200 | ||||
(+) | Depreciation | 73000 | 73000 | 73000 | 73000 | |||
Net cash revenue | 1,22,200 | 1,22,200 | 1,22,200 | 1,22,200 | ||||
Salavage value | 18,000 | |||||||
P.V factor | 0.9091 | 0.8264 | 0.7513 | 0.683 | ||||
Net cash inflow | 1,11,092 | 1,00,986 | 91,809 | 95,757 | ||||
Total cash inflow | 3,99,644 | |||||||
Net present value | 89,644 | (3,99,644-3,10,000) | ||||||
b) | PV of cash outflow | = | 3,10,000 | |||||
No of years | = | 4 | ||||||
Depreciation amount | = | (3,10,000)/4 | ||||||
= | 77500 | |||||||
= | 25% | (77500/3,10,000) | ||||||
Depreciation rate in double declining | = | 25*2 | ||||||
50% | ||||||||
PV of cash inflow | ||||||||
1 | 2 | 3 | 4 | |||||
Incremental cash revenue | 1,55,000 | 1,55,000 | 1,55,000 | 1,55,000 | ||||
(-) | Depreciation | 155000 | 77500 | 38750 | 19375 | |||
(3,10,000*50%) | (3,10,000-1,55,000)*50% | (1,55,000-77500)*50% | (77500-38750)*50% | |||||
Net cash revenue after dep | 0 | 77,500 | 1,16,250 | 1,35,625 | ||||
(-) | Tax rate (40%) | 0 | 31000 | 46500 | 54250 | |||
Cash revenue after tax | 0 | 46,500 | 69,750 | 81,375 | ||||
(+) | Depreciation | 155000 | 77500 | 38750 | 19375 | |||
Net cash revenue | 1,55,000 | 1,24,000 | 1,08,500 | 1,00,750 | ||||
Salavage value | 18,000 | |||||||
P.V factor | 0.9091 | 0.8264 | 0.7513 | 0.683 | ||||
Net cash inflow | 1,40,911 | 1,02,474 | 81,516 | 81,106 | ||||
Total cash inflow | 4,06,006 | |||||||
Net present value | 96,006 | (4,06,006-3,10,000) | ||||||
c) | Payback Period | 2 years | ||||||
1 | 1,55,000 | 1,55,000 | ||||||
2 | 1,55,000 | 3,10,000 | ||||||
3 | 1,55,000 | 4,65,000 | ||||||
4 | 1,55,000 | 6,20,000 | ||||||
In 2 years 3,10,000 can be recovered | ||||||||
Unadjsuted rate of return | 41% | (126500/310000) | ||||||
Average investment | 122000+122000+122000+122000+18000/4 | 126500 | ||||||
d) | Payback period | 2 years | ||||||
1 | 1,55,000 | 1,55,000 | ||||||
2 | 1,55,000 | 3,10,000 | ||||||
3 | 1,55,000 | 4,65,000 | ||||||
4 | 1,55,000 | 6,20,000 | ||||||
Unadjsuted rate of return | 41% | (126562/310000) | ||||||
Average investment | 155000+124000+108500+118750/4 | 126562.5 | ||||||
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