Mahesh Industries is examining a proposal for new capital investment. Initial investment in the project is ₹ 12,00,000. Estimated salvage value is ₹ 3,00,000. Company uses straight line method of depreciation. The projected profits before depreciation & tax are as given below : Corporate tax rate is 25%, Cost of capital is 10%. Determine NPV of the project. Should the company invest in the project ?
Mahesh Industries is examining a proposal for new capital investment. Initial investment in the project is ₹ 12,00,000. Estimated salvage value is ₹ 3,00,000. Company uses straight line method of depreciation. The projected profits before depreciation & tax are as given below : Corporate tax rate is 25%, Cost of capital is 10%. Determine NPV of the project. Should the company invest in the project ?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Mahesh Industries is examining a proposal for new capital investment. Initial investment in the project is ₹ 12,00,000. Estimated salvage value is ₹ 3,00,000. Company uses straight line method of
Corporate tax rate is 25%, Cost of capital is 10%. Determine NPV of the project. Should the company invest in the project ?
![Year
Amount
2,70,000
3,10,000
3,60,000
4,70,000
5,90,000
1
3
4
Year
1
3
4
5
PV factor@10% 0.909 0.826 0.751 0.683 0.621](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F656a2140-faca-4b39-91be-412c6c1e7f94%2F9c635b38-e30c-460b-8a53-5c4051a544c9%2Fo0ycy9j_processed.png&w=3840&q=75)
Transcribed Image Text:Year
Amount
2,70,000
3,10,000
3,60,000
4,70,000
5,90,000
1
3
4
Year
1
3
4
5
PV factor@10% 0.909 0.826 0.751 0.683 0.621
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