Capital budgeting

Zenith Industries Ltd. are thinking of investing in a project cost ` 20 lakhs. The life of the project is

five years and the estimated salvage value of the project is zero. Straight line method of charging

depreciation is followed. The tax rate is 50%. The expected cash-flows before tax are as follows:

Year                                                                                      1 2 3 4 5

Estimated Cash flow before depreciation and tax (` Lakhs)        4 6 8 8 10

You are required to determined the:

i) Pay back period for the investment