The management of P Limited is considering to purchase Machine. The company's cost of capital is 12 percent and corporate tax rate for the company is 30 percent. Details of
the machine are as follows :
Cost of machine 10,00,000
Expected life 5 years
Annual income before tax and depreciation 3,45,000
Calculate internal rate of return
Please upload working in excel - please help
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IRR
Replies (5)
IRR is 6.63%. The excel sheet is attached
PLEASE FIND ATTACHED HEREWITH THE .XLS FILE.
REGARDS,
DEVENDRA KULKARNI
Dear Friend Devendra
I am attaching two files one is excel where i have calculated IRR and the answer is 15.45%, but i have attached PDF file of "Solved Answer Cost & F.M. CA Pcc & Ipcc May. 2010", if you see Qn 7(a), the answer is "13.35%", please help me to judge ----- > whatever the reply, please advice.
my Email : - parajf @ gmail.com, i will be available in gtalk with mentioned ID.
regards
juzar para
Dear Friend Devendra
please file excel file
Oops I missed considering depreciation while calculating tax. The correct answer is 15.4 % only.
In the 'Solved Answer Cost & F.M. CA Pcc & Ipcc May. 2010,' the formula should be 14% + ..... instead of 12%+... since the numerator shows the difference between the cost of machine and 1035074 where 1035074 is the PV of 14% . so the answer arrives to nearly 15.4%.
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