The following are the data on capital expenditure of a project being evaluated by Management of Vivaan Limited: Particulars Annual cost savings ₹40,00,000 Useful life 4 years Internal Rate of Return 15% Profitability Ind

CS Professional · Financial, Treasury and Forex Management · PYQS · June 2017
The following are the data on capital expenditure of a project being evaluated by Management of Vivaan Limited: Particulars Annual cost savings ₹40,00,000 Useful life 4 years Internal Rate of Return 15% Profitability Index 1.064 From the above information find out the following by assuming that salvage value is zero: (ii) Payback period

Answer & Explanation:

Payback period Year Cost savings Cumulative cost savings 1 40,00,000 40,00,000 2 40,00,000 80,00,000 3 40,00,000 1,20,00,000 4 40,00,000 1,60,00,000 Payback period = 2 + (1,14,20,000 - 80,00,000) / 40,00,000 = 2.855 years

Topics: Financial Management

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