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Important questions on Capital Budgeting| |cost estimation problems|

1) A project requires an investment of rupees 5 lakh and has a scrap value of rupees 20,000 at the end        off five years , it is estimated to yield cash inflows of rupees 40,000,Rs 60,000, Rs 70,000, Rs                 50,000, Rs 20,000 respectively,

The cash inflows have been estimated after considering depriciation of assets and payment of all taxes are made, calculate The return on investment from the project?

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2) A manufacturing wants to pursue an investment proposal that costs Rs1,00,000 and will have a             salvage value of  Rs20,000 after 5 years, The estimated cash inflows from the proposal before                 depriciation of assets and before payment of taxes are Rs 30,000, Rs 40,000, Rs 35,000, Rs 45,000         and Rs 30,000 respectively for 5 years.

The firm uses straight line method for accounting depriciation of assets and has tax rate of 40% per annum, calculate The return on investment from the proposal?

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3) A company is considering the purchase of a machinery that costs Rs 3,00,000, and it's expected to          carry a value of Rs 50,000 at the end of 5 years. The company has adopted straight line method for       calculating depriciation and has a tax rate of 40% per annum, the estimated cash inflows before               depriciation of the machine and before payment of taxes are Rs 1,10,000, Rs 1,20,000, Rs 1,40,000,       Rs 1,50,000 and Rs 2,00,000 respectively for 5 years.

Calculate a) payback period. b)return on investment. c) net present value considering depriciation                              value of money as 10% per annum?

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>> we know that 
     Inflow BDAT = Inflow ADAT+ depriciation







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