Reference no: EM132796594
After considering a survey that cost Rs. 300000 X Ltd., decided to undertake a project putting a new product in the market. The company's cut off rate is 12%. It was estimated that the project would have a life of 5 years. The project would cost Rs 60, 00,000 in p& M in addition to working capital of Rs. 15, 00,000. The machine has no scrap value at the end of 5 years. After providing depreciation on straight line basis, profits after tax were estimated as follows:
Year Amount (Rs.)
1 6,00,000
2 10,00,000
3 26,00,000
4 10,00,000
5 8,00,000
Questions:
a. Calculate the initial, operating and terminal cashflows.
b. Calculate the NPV and IRR. Comment if the project should be accepted or not.
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