Given below cash flows details of a project:   Period 0 1 2 3 4 5 Demand (in units)   40000 45000 42000 38000 30000 Initial Investment in million -100           Sales 40,000*1000)/1000000   40        45 42 38 30 Selling price per unit Rs. 1000             Variable cost per unit Rs. 300 per unit             Fixed Cost Rs. 10 million             Depreciation 25% written down value             Resale price (in million)   110 100 90 50 30   Corporate tax rate 35%, capital gain tax 20% Required: You are required to estimate cash flows and decide the period in which project should be abandoned

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  1. Given below cash flows details of a project:

 

Period

0

1

2

3

4

5

Demand (in units)

 

40000

45000

42000

38000

30000

Initial Investment in million

-100

 

 

 

 

 

Sales 40,000*1000)/1000000

 

40       

45

42

38

30

Selling price per unit Rs. 1000

 

 

 

 

 

 

Variable cost per unit Rs. 300 per unit

 

 

 

 

 

 

Fixed Cost Rs. 10 million

 

 

 

 

 

 

Depreciation 25% written down value

 

 

 

 

 

 

Resale price (in million)

 

110

100

90

50

30

 

  • Corporate tax rate 35%, capital gain tax 20%

Required:

  • You are required to estimate cash flows and decide the period in which project should be abandoned.  
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