Question

A company is considering a project with the following cash flows:
Year Project A (₹)
0 2,00,000
1 1,00,000
2 1,00,000
3 80,000
4 80,000
5 40,000
Evaluate using Pay back and IRR methods assuming tax @ 40% and 20% depreciation with no salvage value. Which other method you would suggest the company to use for evaluating the above proposal? Give reasons

Answer 1

Answer:

The payback period is the number of months or years it takes to return the initial investment. To calculate a more exact payback period: payback period = amount to be invested / estimated annual net cash flow