ABC Corporation is evaluating a new project requiring an initial investment of Rs. 2,50,000. The...
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Accounting
ABC Corporation is evaluating a new project requiring an initial investment of Rs. 2,50,000. The project is expected to generate the following cash flows:
- Year 1: Rs. 90,000
- Year 2: Rs. 1,10,000
- Year 3: Rs. 80,000
- Year 4: Rs. 60,000
- Year 5: Rs. 50,000
The project will be depreciated on a straight-line basis over its 5-year life. The company's tax rate is 25%, and the cost of capital is 10%.
Required:
- Calculate the project's NPV and IRR.
- Determine the discounted payback period.
- Evaluate the profitability index.
- Compute the annual depreciation expense and its effect on after-tax cash flows.
- Assess the break-even point in terms of cash flows.
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