Time Value of Money Illustration 10


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XYZ & Co. is considering investing in a project requiring a capital outlay of  2,00,000. Forecast for annual income after tax is as follows:

Year

1

2

3

4

5

Profit after Tax ()

1,00,000

1,00,000

80,000

80,000

40,000

Depreciation is 20% on straight line basis

 

Evaluate the project on the basis of Net Present Value taking 14% discounting factor and advise whether XYZ & Co. should invest in the project or not? The present value of Re. 1 at 14% discounting rate are 0.8772, 0.7695, 0.6750, 0.5921 and 0.5194.


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