Firm uses diminishing balance method

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Firm purchased plant Rs. 150,000; foundation cost paid 10,000 and installation Rs. 20,000. Project is forecast for five years, details are as follows:

· Sales 15000 units [growth of sales by 20% for first two years and then 10% for rest of the project life].

· Working capital required at the start of project 10,000.

· Sales price 25 per unit

· Variable cost of sales Rs. 8 per unit

· Fixed expenses Rs. 10,000(excluding depreciation)

Firm uses diminishing Balance Method [rate20%] and tax rate 40%. Assume that plant sold at the end of the project equal to its book value. Cost of capital 15%.

Calculate

NPV and IRR

Reference no: EM132538534

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