1. A company is engaged in evaluating an investment project which requires an initial cash outlay of Rs. 2,50,000 on equipment. The project’s economic life is 10 years and its salvage value is Rs.30,000. It would require current assets of Rs. 50,000. An additional investment of Rs.60,000 would also be necessary at the end of 5 years to restore the efficiency of the equipment. This would be written off completely over the last 5 years. The project is expected to yield an annual (before tax) cash inflow of Rs.1,00,000. The company follows the sum of the year's digit method of depreciation. Income-tax rate is assumed to be 40%. 
2. 
   
3. Should the project be accepted if the minimum required rate of return is 20%?

Answer rating: 100% (QA)

3270 Salumge Cash outhu 2411265 ... View the full answer