Question 1 CACULATE PAYBACK PERIOD @dropdown

COST 40000
Year CFAT CCFAT Payback Period= Initial Investment/ Annual Cash Inflow
1 10000 10000
2 12000 22000 Payback= Full number of year immediately preceding the year of final recovery+ (B
3 10000 32000
4 7000 39000
5 5000 44000

Payback Period = 4+ (1,000/5,000)

4.2

cost 40000
year amount ci
1 10000 10000
2 12000 22000
3 10000 32000
4 7000 39000
5 5000 44000

payback period year+required amount/amount in next year

4.2
the year of final recovery+ (Balance amount/Cash Inflow in the year of final recovery)
Question 2 CALCULATE AVERAGE RATE OF RETURN

Cost of machine 60000 Salvage Value 8000

RRR 0.2
Year Profit After Tax
1 6000
2 7000 ARR= AVERAGE ANNUAL PROFIT (AFTER TAX)/AVERAGE INVESTMENT IN THE PROJECT x 100
3 5000
4 6000 AVERAGE ANNUAL PROFIT= TOTAL PROFIT FOR ALL THE YEARS/ NUMBER OF YEARS
5 8000 AVERAGE INVESTMENT= 1/2( INITIAL INVESTMENT+ ANY INSTALLATION CHARGES- SALVAGE VALUE) +

Average Profit 6400

Avg. investment 34000
ARR 18.8235294118

cost of machine 60000 salvage value 8000

year pat
1 6000
2 7000
3 5000
4 6000
5 8000

Avg profit 6400

AVG INV 34000
ARR 18.8235294118
THE PROJECT x 100

MBER OF YEARS
LATION CHARGES- SALVAGE VALUE) + SALVAGE VALUE
 3 CALCULATE NET PRESENT VALUE

Cost of capital 10% Cash Outflow 100000

Cash Inflow 160000
Year CFAT
0 -100000
1 26000 NPV= PRESENT VALUE OF CASH FLOW - PRESENT VALUE OF C
2 29000 PI= PRESENT VALUE OF CASH FLOW / PRESENT VALUE OF C
3 32000
4 35000
5 38000

NPV ₹ 19,145.86 =NPV(C3,B7:B11)+B6

PI $1.19 "=NPV(C3,B7:B11)/B6

COST 10%
YEAR CFAT
0 -100000
1 26000
2 29000
3 32000
4 35000
5 38000

NPV $19,145.86
PI -$1.19
- PRESENT VALUE OF CASH OUTFLOW
/ PRESENT VALUE OF CASH OUTFLOW
Profitability Index (PI)
cash outflow 100000 PI= sum of Pv of Ci/sum of Pv of CF
cost of capital 10% rule
PI>1= accept
PI<1= reject
year CFAT PI=1= may be accept or reject
1 26000
2 29000
3 32000
4 35000
5 38000

PI 1.191459
Question 4 4 CALCULATE INTERNAL RATE OF RETURN , NPV & PI

Year CFAT Cash Outflow 100000 NPV= PRESENT VALUE OF CASH FLOW - PRESENT VALUE OF CAS
0 -100000 Cost of capital 20% PI= PRESENT VALUE OF CASH FLOW / PRESENT VALUE OF CA
1 40000 IRR= INTERNAL RATE OF RETURN
2 40000
3 20000
4 40000 = IRR (range of cash outflow and inflow)
5 40000 if IRR<required rate of return,reject the proposal
if IRR>required rate of return,accept the proposal
IRR 24% Accepted
NPV $8,050.41
PI $1.08

$8,050.41
24%
$1.08
- PRESENT VALUE OF CASH OUTFLOW
/ PRESENT VALUE OF CASH OUTFLOW
QUESTION 5 CALCULATE NPV & PI

Cost of capital 10% CASH OUTFLOW 60000

YEAR CFAT
0 -60000
1 50000
2 25000 NPV= PRESENT VALUE OF CASH FLOW - PRESENT V
3 5000 PI= PRESENT VALUE OF CASH FLOW / PRESENT

NPV $9,872.28
PI $1.16

NPV 9872.27648385
PI 1.1645379414
IRR 23%
ENT VALUE OF CASH FLOW - PRESENT VALUE OF CASH OUTFLOW
ENT VALUE OF CASH FLOW / PRESENT VALUE OF CASH OUTFLOW
COST 220000
LIFE 5 YEAR 10%
COST OF CAPITAL= 10% NPV= PRESENT VALUE OF CASH FLOW - PRESENT VALUE OF CASH O
CALCULATE NPV ,PI,PBP PI= PRESENT VALUE OF CASH FLOW / PRESENT VALUE OF CASH

YEAR CFAT C.CF Payback Period= Initial Investment/ Annual Cash Inflow
0 -220000
1 50000 50000 50000 Payback= Full number of year immediately preceding the year of final recover
2 50000 100000
3 60000 160000
4 90000 250000
5 90000 340000

NPV $29,209.88
PI $1.13
PBP 3.66666666667
SH FLOW - PRESENT VALUE OF CASH OUTFLOW
SH FLOW / PRESENT VALUE OF CASH OUTFLOW

nual Cash Inflow

ely preceding the year of final recovery+ (Balance amount/Cash Inflow in the year of final recovery)
QUESTION 6

50000
LIFE=5 YEAR
SALVAGE VALUE=NIL
SLM METHOD OF DEPRICIATION YEAR PBDT DEPRICIATION
TAX RATE 35% 0
PROFIT BEFORE DEPRICIATION AND TAX IS GIVEN 1 11000 10000
2 20000 10000
YEAR PBDandT 3 18000 10000
1 11000 4 15000 10000
2 20000 5 12000 10000
3 18000
4 15000
5 12000 AVG. PROFIT 3380
AVG. INVESTMEN 25000
calculate DICOUNT RATE 0.1
1) PBP
2)ARR NPV ₹ 804.51
3)NPV at 10% discount rate PI £1.02
4)PI 10% discount rate PBP 3.57735849057
5)IRR ARR 13.52
IRR 10.63%
PBT TAX@35% PAT CFAT CUMULATIVE
-50000
1000 350 650 10650 10650
10000 3500 6500 16500 27150
8000 2800 5200 15200 42350
5000 1750 3250 13250 55600
2000 700 1300 11300 66900

COST
QUESTION 6

50000
LIFE=5 YEAR
SALVAGE VALUE=NIL
SLM METHOD OF DEPRICIATION YEAR PBDT DEPRICIATION
TAX RATE 35% 0
PROFIT BEFORE DEPRICIATION AND TAX IS GIVEN 1 11000 10000
2 20000 10000
YEAR PBDandT 3 18000 10000
1 11000 4 15000 10000
2 20000 5 12000 10000
3 18000
4 15000
5 12000 AVG. PROFIT 3380
AVG. INVESTMEN 25000
calculate DICOUNT RATE 0.1
1) PBP
2)ARR NPV ₹ 804.51
3)NPV at 10% discount rate PI £1.02
4)PI 10% discount rate PBP 3.57735849057
5)IRR ARR 13.52
IRR 10.63%
PBT TAX@35% PAT CFAT CUMULATIVE
-50000
1000 350 650 10650 10650
10000 3500 6500 16500 27150
8000 2800 5200 15200 42350
5000 1750 3250 13250 55600
2000 700 1300 11300 66900

COST
rate 11%
year project A Project b npv
0 -100000 -100000 irr
1 32000 0 pi
2 32000 0 why there is conflict
3 32000 0 which should be chosen
4 32000 0
5 32000 200000
rate 0.11
NPV ₹ 18,268.70 ₹ 18,690.27
IRR 18%
PI -1.18268705