Question

Q. 2. (a) How is cash flow different from accounting profit? W
er for capital budgeting decisions ? Why?
Or
(b) From the following information find out initial, subsequenta
inal cash flows:
Cost of machine
Rs. 5,25,000
Salvage value
Rs. 30,000
Installation cost
Rs. 5,000
Life
5 Years
Expected annual sales
10,000 units
Sale price per unit
Rs. 40
Variable cost per unit
Rs. 16
Tax rate
50 per cent
Or
A company is considering the following investment projects​

Answer 1

Answer:

                  Cash Flow Statement at the end of the year

Particulars                                                                                     Amount

I) CASH FLOW FROM OPERATING ACTIVITY          

Net Profit after tax ( 400000 - 160000 - 120000)                      1,20,000

ADD - Depreciation on machinery                                                 10,600

                                                                                                       1,30,600

II) CASH FLOW FROM FINANCING ACTIVITY

Sale of Machinery                                                                          30,000

Subsequential Cash flow at the end of the fifth year             1,60,600

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