HIJ Ltd. is considering the purchase of one of two new pieces of equipment. The...
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Accounting
HIJ Ltd. is considering the purchase of one of two new pieces of equipment. The company's cost of capital is 13% and the tax rate is 31%. Below are the details:
Particulars
Equipment A
Equipment B
Cost of equipment
15,00,000
18,00,000
Expected life
5 years
5 years
Annual Income (before Tax & Depreciation)
4,00,000
5,50,000
Depreciation is charged on a straight-line basis. You are required to calculate: a. Discounted payback period b. NPV c. Profitability index
Answer & Explanation
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