A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each, and have a life of five years. The company’s required rate of return is 10% and pays tax at a 35% rate. The projects with be depreciated on a straight – line basis. The before taxes cash flows expected to be generated by the projects are as follows. Before-tax cash flows (Rs.) Project1 2 3 4 5 A 8000 8000 8000 8000 8000B 12000 6000 4000 10000 10000 calcualte for each project: The NPV and the internal rate of return. Which project should be accepted and why.

A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each, and have a life of five years. The company’s required rate of return is 10% and pays tax at a 35% rate. The projects with be depreciated on a straight – line basis. The before taxes cash flows expected to be generated by the projects are as follows. Before-tax cash flows (Rs.) Project1 2 3 4 5 A 8000 8000 8000 8000 8000B 12000 6000 4000 10000 10000 calcualte for each project: The NPV and the internal rate of return. Which project should be accepted and why.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16EA: Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in...

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Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs 10,000 each, and have a life of five years. The company’s required rate of return is 10 per cent and pays tax at a 50 per cent rate. The projects will be depreciated on a straight –line basis. The before taxes cash flows expected to be generated by the projects are as follows:ProjectBefore –tax Cash Flow (Rs)1 2 3 4 5A 4,000 4,000 4,000 4,000 4,000B 6,000 3,000 2,000 5,000 5,000Calculate for each project: 1. The payback2. The average rate of return3. The net present value and profitability index4. The internal rate of return .Which project should be accepted and why?
a company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each, and have a life of five years. The company's required rate of return is 10% and pays tax at a 35% rate. The projects will be depreciated on a straight line basis. The before taxes cash flows expected to be generated by the projects are as follows. Before tax cash flows (Rs.) Project A - 1 2 3 4 5 is 8000 8000 8000 8000 8000 Project B - 1 2 3 4 5 is 12000 6000 4000 10000 10000 Calculate for each project : the NPV and the internal rate of return. Which project should be accepted and why.
A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each, and have a life of five years. The company's required rate of return is 10% and pays tax at a 35% rate. The projects with be depreciated on a straight-line basis. The before taxes cash flows expected to be generated by the projects are as follows. Before-tax cash flows (Rs.) Project 1 2 3 4 5 A 8000 8000 8000 8000 8000B 12000 6000 4000 10000 10000 calcualte for each project: The NPV and the internal rate of return. Which project should be accepted and why.
A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each and have a life of five years. The company’s required rate of return is 10% and pays tax at a 35% rate. The projects with be depreciated on a straight-line basis. The before taxes cash flows expected to be generated by the projects are as follows. Before-tax cash flows (Rs.) Project1 2 3 45 A 8000 8000 8000 8000 8000B 12000 6000 4000 10000 10000 calculate for each project. The NPV and the internal rate of return. Which project should be accepted and why.
A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each and have a life of five years. The company's required rate of return is 10% and pays tax at a 35% rate. The projects with be depreciated on a straight-line basis. The before taxes cashflows (Rs.) Project 1 2 3 4 5 A 8000 8000 8000 8000 8000B 12000 6000 4000 10000 10000 calculate for each project. The NPV and the internal rate of return. Which project should be accepted and why.
Annapurna Trading Ltd. is evaluating two mutually exclusive projects: Project A and Project B. The company will require Rs 140,000 for Project A and Rs 100,000 for Project B. The net cash outflow and profit after tax of these projects are as follows: Year Cash Flows Year A B -Rs 140,000 -Rs 100,000 Profit after taxes 1 Rs 25,000 Rs 10,000 2 25,000 15,000 3 25,000 20,000 4 25,000 25,000 5 25,000 35,000 Both projects will be depreciated on straight line over a five-year life and cost of capital of the company is 12 percent. Calculate the PBP of each project. If firm has set a maximum payback period of three years, suggest as to which project is preferred.
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A project has the following net profit after tax set out below. The average book value of the assets in the project is 131,028. What is the accounting rate of return of this project? Enter your final answer in decimals to four decimal places (e.g., if your answer is 5.55%, then enter 0.0555). Year Net Profit After Tax 1 5,097 2 7,365 3 8,627 4 10,946
A project requires an initial investment of $200,000 and expects to produce a cash flow before taxes of $120,000 per year for two years (i.e., cash flows will occur at t = 1 and t = 2). The corporate tax rate is 21 percent. The assets will depreciate using the MACRS year 3 schedule: (t = 1: 33%); (t = 2: 45%); (t = 3: 15%); (t = 4: 7%). The company's tax situation is such that it can use all applicable tax shields. The opportunity cost of capital is 11 percent. Assume that the asset can sell for book value at the end of the project. Calculate the approximate IRR for the project.
deep waters inc is using the internal rate of return (IRR) when evaluating projects. Find the IRR for the companys project. The initial outlay for the project is $473, 700. The project will produce the following after tax cash inflows of year I 156,400, year 2- 120,600, year 3 155,700, year 4 178,900 round the answer to two decimal places in percentage form
A project requires an initial investment of $200,000 and expects to produce a cash flow before taxes of $120,000 per year for two years (i.e., cash flows will occur at t= 1 and t= 2). The corporate tax rate is 21 percent. The assets will depreciate using the MACRS 3-year schedule: (t = 1, 33%); (t = 2: 45% ); (t = 3: 15%); ( t = 4: 7%). The company's tax situation is such that it can use all applicable tax shields. The opportunity cost of capital is 12 percent. Assume that the asset can sell for book value at the end of the project. Calculate the NPV of the project (approximately). Multiple Choice $22,463 $19,315 $22,735 $5,721