Tiger Ltd, a non-manufacturing firm invests in a new machinery costing ₵40,000 on 1 October 2010. It intended to operate the machinery for 4 years when the scrap value will be zero(i.e.in other words its scrap value will be equal to its written-down value at the end of year 4). The operating economic pre-tax cash flows from the investment are ₵10,000 in the first year and ₵20,000 for each of the next three years. Assume no inflation effects on cash flows. The cost of capital is 15% and corporation tax is 28% and paid in the same year as related profit. 

Evaluate for NPV

Answer rating: 100% (QA)

To calculate the NPV we first need to calculate the present va... View the full answer