YZA Ltd is considering a project with the following details:Initial investment: $250,000Annual profits before depreciation...
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Accounting
YZA Ltd is considering a project with the following details:
- Initial investment: $250,000
- Annual profits before depreciation and tax:
- Year 1: $50,000
- Year 2: $60,000
- Year 3: $70,000
- Year 4: $80,000
- Year 5: $90,000
The project will be depreciated straight-line over 5 years with no salvage value. The tax rate is 27%. Required:
a. Calculate the Payback Period and ARR
b. Determine NPV and PI, assuming a discount rate of 10%
c. Calculate the IRR
d. Perform a risk analysis considering different profit scenarios
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