post-back profitability inde

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
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Question three

For each of the following projects compute (i) pay-back period, (ii) post payback

profitability and (iii) post-back profitability index

  1. Initial outlay             50,000,000

  Annual cash inflow (after tax but before depreciation)  Shs .10,000,000 

      Estimated life                                                           8 Years

  1. Initial outlay 50,000,000

  Annual cash inflow (after tax but before depreciation)  

    First three years   Shs .15,000,000

     Next five years     Shs.  5,000,000

Estimated  life               8 Years Salvage  Shs.  8,000,000

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