DEF Enterprises plans to undertake a project with the following projections:Initial investment: Rs. 3,00,000Project lifespan:...
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Accounting
DEF Enterprises plans to undertake a project with the following projections:
- Initial investment: Rs. 3,00,000
- Project lifespan: 4 years
- Annual profits after depreciation and before tax: Rs. 1,20,000, Rs. 1,00,000, Rs. 90,000, Rs. 80,000
- Depreciation rate: 20% on original cost
- Tax rate: 28%
Required:
- Calculate the ARR and PBP.
- Compute the project's NPV, assuming a discount rate of 9%.
- Determine the IRR for the project.
- Assess the impact of a change in the discount rate to 12%.
- Conduct a sensitivity analysis on the annual profit.
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