Question

The initial investment of a project is rs 100000 The cash flows are as follows. Calculate payback period Also find ARR assuming a
tax rate 30%. and depreciation on straightline methed
yr cashflows
1. 65000
2. 55000
3. 45000
4. 35000​

Answer 1

Answer:

answer is 10,000

Explanation:

because depreciation persent is 30 percent in 65000 is 10000

Answer 2

Answer:

Initial Outflow = 100000

Year 1 Cash Flows Dep. Tax. Net Cash Flow

1. 65000 25000 12000 53000

2. 55000 25000 9000 46000

3. 45000 25000 6000 39000

4. 35000 25000 3000 32000

Average profit =( 53000 + 46000 + 39000 +32000)/4 = Rs 85000

Average Rate of Return = Average Profit / Investment * 100 = 85000/100000 *100

= 85%

Net Cash Flow. Cumulative Cash Flow

53000 53000

46000 99000

39000 138000

32000 170000

Payback period = 2 + (100000 - 99000)/ (138000-99000) = 2 + 1000/39000 = 2 +.026

= 2 +. 026 = 2.026