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Compute cash flow for 5 years

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A company is considering an investment proposal to install new milling machine. The project will cost Rs.50,000. The facility has a life expectancy of 5 years and no salvage value. The company tax rate is 40%. Firm uses straight-line method for depreciation. The estimated earnings before tax from the proposed investment plan are as under.

Year Earning before tax

1 Rs. 22,000
2 18,000
3 14,000
4 15,000
5 25,000

Compute cash flow for 5 years.

Calculate:

1. Payback period

2. Profitability Index

3. IRR

4. NPV (discount rate is 15%)

Reference no: EM132758024

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