ans1

Initial Investment
CFBT

50000
1
10000

dep
CBT
Tax
CFAT
Depreciation reversal
Operating flows
NPV@10%

10000
10000 10000
10000
0
692
2769
3462
0
242.2 969.15 1211.7
0
449.8 1799.9 2250.3
10000
10000 10000
10000
10000 10449.8 11800 12250.3
9090.9 8636.2 8865.4 8367.12

payback period

ans 2
cost of new machine
disposal value of old asset
incremental benefit
incremental cost
profit before dep and tax
depreciation
profit before tax
tax @ 35%
Profit after tax
depreciation reversal
operating flows
terminal flow
cash flows
pv @ 12%

2
3
10,692 12,769

20449.8

0
35
9

4
13,462

5
20,385

10000
10385
3634.75
6750.25
10000
16750.3
10400.6 45360.22
NPV
-4639.78
32250
44500 61250.2
0.32836
4.32 years

12
7
5
35
-30
-10.5
-19.5
35
15.5

12
7
5
0
5
1.75
3.25
0
3.25

12
7
5
0
5
1.75
3.25
0
3.25

12
7
5
0
5
1.75
3.25
0
3.25

12
7
5
0
5
1.75
3.25
0
3.25

-26
15.5
3.25
3.25
-26 13.8393 2.5909 2.31329

12
7
5
0
5
1.75
3.25
0
3.25
1
3.25
3.25
4.25
2.06543 1.844137 2.15318227
-1.19379508
NPV

Ans 3 Initial Outlay= 200000-60000= 140000

Year
New machine

Depreciation Schedule
1
2
3
4
200000 150000 112500
84375
50000
37500 28125 21093.8
150000 112500 84375 63281.3

5
63281.3
15820.3
47460.9

Old machine

60000
15000
45000

45000 33750 25312.5

11250 8437.5 6328.13
33750 25313 18984.4

18984.4
4746.09
14238.3

Incremental depreciation

35000

26250

11074.2

Initial Investment
Incremental benefit
Saving in cost
Incremental dep.
Inc. EBT
Tax @50%
EAT
Dep. Reversal
Annual Cash flows

0
-140000

19688 14765.6

New machine
Capital gain= SV-BV= 50000-47460.0
Capital gain=2539.063
CG Tax= 2539.063* 0.50
Tax=
1269.531
Net salvage value= 50000- 1269.531
=

50000
20000
35000
35000
17500
17500
35000
52500

50000
20000
26250
43750
21875
21875
26250
48125

50000
20000
19687.5
50312.5
25156.3
25156.3
19687.5
44843.8

50000
20000
14765.6
55234.4
27617.2
27617.2
14765.6
42382.8

50000
20000
11074.22
58925.78
29462.89
29462.89
11074.22
40537.11

Terminal cash flows

cash flows
Disc. CF
NPV

Calculation of Capital Gain tax

31611.33
-140000
52500
-140000 47727.3

48125 44843.8
39773 33691.8

42382.8 72148.44
28948 44798.5
54938.31

Old machine
Capital gain= SV-BV= 20000-14238.3
Capital gain=5761.719
CG Tax= 5761.719* 0.50
Tax=
2880.859
Net salvage value= 20000- 2880.859
=

Terminal cash flow= 48730.47-17119.14= 31611.

Ans 4Year
Initial cash outlay
Savings
Accommodation charges
Boarding charges
Inhouse training
Total savings
Less: Maintainance cost
Less: Depreciation on construction cost
Savings before tax
Less: Tax @ 50%
Savings after tax
Add: Depreciation on construction cost
Net cash flow
Present value @ 15%
NPV

0
-15

8
0.5
2
10.5
1.5
3
6
3
3
3
6
5.21739
10.888

10
12
0.5
0.5
2
2
12.5
14.5
1.5
1.5
3
3
8
10
4
5
4
5
3
3
7
8
5.293 5.26013

14
16
0.5
0.5
2
2
16.5
18.5
1.5
1.5
3
3
12
14
6
7
6
7
3
3
9
10
5.14578 4.971767

n of Capital Gain tax

ain= SV-BV= 50000-47460.0

2539.063* 0.50

ge value= 50000- 1269.531

48730.4688

ain= SV-BV= 20000-14238.3

5761.719* 0.50

ge value= 20000- 2880.859

17119.1406

cash flow= 48730.47-17119.14= 31611.33