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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