# a). Calculation of Depreciation. Machine A =. 125000 -

Added on - 13 Sep 2019

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(a)Calculation of DepreciationMachine A =125000 - 250003=1000003=33333Machine X =600005=12000Machine B =1250006=20833Calculation of Cash Inflow of Project A201620172018201920202021Net Profit600006000060000500005000040000Add: Depreciation333333333333334120001200012000Cash Inflow933339333393334620006200052000Calculation of Cash Inflow of Project B201620172018201920202021Net Profit200003000040000700008000065000Add: Depreciation208332083320833208332083420834Cash Inflow4083350833608339083310083485834Calculation of Net Present ValueProject AYearCash FlowPVF@20%Present Valueof Cash Flow-1250001-1,25,0002016933330.833
77,7462017933330.69464,7732018933340.57954,0402018-350000.579-20,2652019620000.48229,8842020620000.40224,9242021520000.33517,420240000.3358,040NPV ofProject A1,31,563Project BYearCash FlowPVF@20%Present Valueof Cash Flow-1250001-1250002016408330.83334013.8892017508330.69435278.1022018608330.57935222.3072019908330.48243781.50620201008340.40240535.2682021858340.33528754.39NPV ofProject B92585Calculation of IRRInternal Rate of return of project is the rate of return at which Net present value of project will be zero.Project ALet us assume that rate of return is 59.50 %YearCash FlowPVF@59.50%Present Valueof Cash Flow-1250001-1,25,0002016933330.62658,4542017933330.39336,680 