QUESTIONS RELATED TO K-Budgeting



QUESTIONS RELATED TO   K-Budgeting
Question number 1

The company is considering an investment proposal to initial new milling's controls. The project will cost RS. 50,000/-. The facility has a live expectancy of 5 years and no salvage value. The tax from the proposed investment proposal are as foll,000/-. The facility has a live expectancy of 5 years and no salvage value. The tax from the proposed investment proposal are as follow
Years
Profit before depreciation
1
10,000
2
11,000
3
14,000
4
15,000
5
25,000

Compute the following
1-      Payback period (PBP)
2-      Average rate of return ( ARR)
3-      Net present value at 10% discount rate (NPV)
4-      Internal rate of return at 8% discount rate (IRR)
5-      Priority index at 10% discount rate ( PI)

Question number 2

Cost of plant =50,000
Estimated life= 5 years
Scrap value=0
Profit before depreciation and tax= 175,000
Requirements
Find cash flow at the 30% of tax rate

QUESTION NUMBER 3
ABC  company  is considering a proposal to replace one of its machine  cost 60,000/-( having a written value of24,000). The remaining live of economics plant is 4 years after which it has no salvage value. However it is sold today than it has salvage value of 20,000. The new machine costing 130,000 is also expected life is 4 years with the scrap value of 18,000. The machine due to technology the expected contribution of 60,000 ( before depreciation and tax). Find out the cash flow associate with this decision given that the tax rate is applicable to the firm is 30%.

QUESTION RELATED TO PREVIOUS FORMULA'S 

Q. why we should add the interest if someone give net profit?
Q. why we add depreciation again if we minus already?


TO BE CONTINUED......................

do Go the YouTube for the explanation and for the answers of the question 

https://www.YouTube.com/channel/UC3yJFNGBqk3bHgvbzGS71RA?view_as=subscriber

 PREVIOUS WE DISCUSS ABOUT

Financial management and its aspects 
What is capital budgeting 
capital budgeting numerical tricks 

links of previous blog 

http://therafiamemonibf.blogspot.com/2018/09/capital-budgeting-numerical-solve-tricks.html

 http://therafiamemonibf.blogspot.com/2018/09/what-is-capital-budgeting.html

http://therafiamemonibf.blogspot.com/2018/09/financial-management-and-its-aspects.html





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