Question

Bajaj Ltd. is considering an investment proposar requiring initial investment of 50,000. The estimated life of the project is 5 years and no salvage value. The company uses SLM method of Depreciation. The corporate tax rate is 35%. The estimated profit before depreciation and tax from the investment proposa! are as follows : Year Profit before Depreciation & Tax i 11,000 20,000 3 18,000 4 15.000 5 12,000 Calculate : (i) Net Present Value (NPV) (ii) Profitability Index (PI) both at 10% discount rate.​

Answer 1

Answer:

requiring initial investment of 50,000. The estimated life of the project is 5 years and no salvage value. The company uses SLM method of Depreciation. The corporate tax rate is 35%. The estimated profit before depreciation and tax from the investment proposa! are as follows : Year Profit before Depreciation & Tax i 11,000 20,000 3 18,000 4 15.000 5 12,000 Calculate : (i) Net Present Value (NPV) (ii) Profitability Index (PI) both at 10% discount rate.