Calculate the cash flows for cosmetic company

Reference no: EM13897416

A cosmetic company is considering to introduce a new lotion. The manufacturing equipment will cost Rs.5,60,000. The expected life of the equipment is 8 years. The company is thinking of selling the lotion in a single standard pack of 50 grams at Rs.12 each pack. It is estimated that variable cost per pack would be Rs.6 and annual fixed cost Rs.4,50,000. Fixed cost includes (straight line) depreciation of Rs.70,000 and allocated overheads of Rs.30,000. The company expects to sell 1,00,000 packs of the lotion each year. Assume that tax is 45% and straight line depreciation is allowed for tax purpose. Calculate the cash flows

Reference no: EM13897416

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