Homework Answers
Statement showing NPV and annual cash flow
| Particulars | 0 | 1 | 2 | 3 | NPV |
| Purchase price of Machine | -80000 | ||||
| Savings in cost | 80000 | 80000 | 80000 | ||
| Less: Depreciation | 26667 | 26667 | 26667 | ||
| PBT | 53333 | 53333 | 53333 | ||
| Tax @ 21% | 11200 | 11200 | 11200 | ||
| PAT | 42133 | 42133 | 42133 | ||
| Add: Depreciation | 26667 | 26667 | 26667 | ||
| Annual cash flow | 68800 | 68800 | 68800 | ||
| Cash flow | -80000 | 68800 | 68800 | 68800 | |
| PVIF @ 15% | 1.0000 | 0.8696 | 0.7561 | 0.6575 | |
| Present Value | -80000 | 59826 | 52023 | 45237 | 77086 |
Free Cash flow form operation = 68800$
NPV = 77086$
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