Reference no: EM132792305
Question - The following details are available for Gamma Ltd:
Details Proposal A Proposal B
Initial Cost Rs.10,00,000 Rs. 12,00,000
Expected life 4 years 5 years
Profits before tax after depreciation
Rs. 3,00,000 each for first two years
Rs. 3,50,000 each for next two years
Rs. 3,00,000 each for first two years
Rs. 3,50,000 each for next three years
Calculate Discounted Payback period and suggest which one is better if the discounting factor is 10% and tax rate 30%. Show in detail relevant calculations and use Straight Line Method of Depreciation.