PQR Ltd. is planning to undertake a project with the following financial data:Initial investment: Rs....
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Accounting
PQR Ltd. is planning to undertake a project with the following financial data:
- Initial investment: Rs. 4,50,000
- Project duration: 5 years
- No salvage value
- Annual profits after depreciation but before tax: Rs. 1,50,000, Rs. 1,40,000, Rs. 1,20,000, Rs. 1,00,000, Rs. 90,000
Depreciation is calculated at 18% on the original cost, and the tax rate is 34%.
Required:
- Compute the PBP and ARR.
- Determine the NPV and PI, with a cost of capital of 10%.
- Calculate the IRR for the project.
- Analyze the effect of a 10% reduction in annual profits on the NPV.
- Conduct a sensitivity analysis with a tax rate of 30%.
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