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bachelor in business administration
Polytechnic State University Sanluis
Jan-2006 - Nov-2010
CPA
Polytechnic State University
Jan-2012 - Nov-2016
Professor
Harvard Square Academy (HS2)
Mar-2012 - Present
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
                                         ($)        ($)
Â
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
Â
You are asked to advise which proposal would be financially preferable.
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