SP Limited company is having two projects, requiring a capital outflow of $3,00,000 on each project.The expected annual income after depreciation but before tax is as follows:
|
Year
|
Project-A $
|
Project-B$
|
|
1
|
9,000
|
80,000
|
|
2
|
80,000
|
100,000
|
|
3
|
70,000
|
30,000
|
|
4
|
60,000
|
90,000
|
|
5
|
50,000
|
40,000
|
Depreciation may be taken as 20% of original cost and taxation at 50% of net income: You are required to calculate:
(a) Pay-back period
(b) Net present value
(c) Accounting rate of return
(d) Net present value index.
(e) Internal rate of return.