Mahesh Industries is examining a proposal for new capital investment. Initial investment in the project is ₹ 12,00,000. Estimated salvage value is ₹ 3,00,000. Company uses straight line method of...

Mahesh Industries is examining a proposal for new capital investment. Initial investment in the project is ₹ 12,00,000.  Estimated salvage value is ₹ 3,00,000. Company uses straight line method of depreciation. The projected profits before depreciation & tax are as given below :


Corporate tax rate is 25%, Cost of capital is 10%. Determine NPV of the project. Should the company invest in the project ?

Extracted text: Year Amount 2,70,000 3,10,000 3,60,000 4,70,000 5,90,000 1 3 4 Year 1 3 4 5 PV factor@10% 0.909 0.826 0.751 0.683 0.621