CAPITAL BUDGETTING - NPV

This query is : Resolved

CA Ankit Gulgulia (Jain) (Querist)
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30 November 2007 NET SALES REVENUE 475000
COST OF GOOD SOLD 200000
GENERAL EXPENSES 100000
DEPRICIATION 50000
PBIT 125000
INTEREST 25000
PBT 100000
TAX @ 40% 40000
PROFIT AFTER TAX 60000

Q.1 WHAT IS ANNUAL CASH INFLOW CONSIDERING INTEREST EXCLUSION
PRINCIPLE WITHIN NPV METHOD?
Q.2 WILL WE TAKE TAX SAVING ON INTEREST , REASON?
Q.3 WILL WE IGNORE INTEREST DUE TO ABOVE MENTIONED PRINCIPLE
, GIVE REASON?

I WILL BE THANKFUL FOR YOUR RESPONSE , THANK YOU IN ADVANCE.

KAAPIL

KAAPIL (Expert)
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03 December 2007 PBIT = 125000

Tax = 40% = 50000

PAT = 75000

CFAT = 125000

(Add Depreciation)

This is the case of Interest Exclusion Principle and then you do not consider tax savings.

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