In: Economics
Particulars | Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 |
Cost of Equipment | -50,000 | |||||||
Revenue | 12,500 | 13,000 | 13,500 | 14,000 | 14,500 | 15,000 | 15,500 | |
AOC | 4,000 | 4,500 | 5,000 | 5,500 | 6,000 | 6,500 | 7,000 | |
Depreciation Rate | 14.29% | 14.29% | 14.29% | 14.29% | 14.29% | 14.29% | 14.29% | |
Depreciation | 7,143 | 7,143 | 7,143 | 7,143 | 7,143 | 7,143 | 7,143 | |
Net Profit | 1,357 | 1,357 | 1,357 | 1,357 | 1,357 | 1,357 | 1,357 | |
Tax @ 40% | 543 | 543 | 543 | 543 | 543 | 543 | 543 | |
Net Profit after tax | 814 | 814 | 814 | 814 | 814 | 814 | 814 | |
Add Depreciation | ||||||||
Cash Flows after tax | -50,000 | 7,957 | 7,957 | 7,957 | 7,957 | 7,957 | 7,957 | 7,957 |
PVF @15% | 1 | 0.870 | 0.756 | 0.658 | 0.572 | 0.497 | 0.432 | 0.376 |
PV of Cash flows | -50,000 | 6,919 | 6,017 | 5,232 | 4,550 | 3,956 | 3,440 | 2,991 |
NPV | -19,886 |
Depreciation Rate = 100%/7 => 14.29%.
As project is yielding negative NPV it is not recommended to proceed with this.
Thanks!!.
Please Like and Support!!