JKL Corp. is planning to invest in a new project with an initial cost of...
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Accounting
JKL Corp. is planning to invest in a new project with an initial cost of Rs. 4,00,000 and no salvage value. The expected profits after depreciation but before tax over the project’s life of 5 years are:
Year 1: Rs. 90,000
Year 2: Rs. 85,000
Year 3: Rs. 80,000
Year 4: Rs. 75,000
Year 5: Rs. 70,000
The project will be depreciated at 10% on the original cost, and the tax rate is 33%.
Required:
Calculate the PBP and ARR.
Compute the NPV and PI, assuming a discount rate of 11%.
Determine the IRR for the project.
Evaluate the impact of a 20% decrease in profits on the project’s NPV.
Conduct a sensitivity analysis with a tax rate of 25%.
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