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Question: CAPITAL BUDGETING

X Company is exmanining two mutually exclusive proposals for new capital investment.The data on the proposals are as follows

A B
($) ($)

Net cash outlay 40000          50000
Salvage value Nil    Nil
Estimated life    4 years        4 years
Depricistion SLM SLM
Income Tax rate                     50%           50%
Cut off rate for appraisal          10%           10%
EBIT
Ist Year                             12000          14000
2nd Year                            14000          16000
3rd Year 16000          18000
4th Year                             22000          22000
5th Year -       20000

You are asked to advise which proposal would be financially preferable.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92286136

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