Compute the net present value of the investment decision

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Question - Topic - Capital Budgeting - NE-YO Corporation is currently manufacturing laptops using traditional technology. With the improving economic decisions and increasing demands of the market, it pushed through with the purchase and operation of a more sophisticated machine. The net investment of decision is P276,200 which includes P247,500 capitalizable cost of machine and P50,000 of additional net working capital. The machine has a useful life of 5 years and a salvage value of P27,500. The annual operating cash inflow and outflow from this decision is P140,000 and P60,000 respectively. Assume a tax rate of 40% and a cost of capital of 10%.

A. Compute the after-tax net annual cash flow.

B. Compute the return of capital at the end of the investment.

C. Compute the net present value of the investment decision.

D. Compute the profitability index of the investment decision.

Reference no: EM133076371

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