Mr. Kumar, a sole proprietor, owns the proprietorship firm named ‘City-Taxi’. The firms deals in providing self-driven cars to the customers. In 2019, Mr. Kumar planned to expand his portfolio by purchasing a premium luxury car (hereinafter ‘Car Z’). Besides, he is also planning to sell off one of the car from the existing fleet (hereinafter ‘Car X’).

About Car Z – The ex-showroom price of this car is INR. 72.0 Lakhs. While, the registration charges are INR. 2.0 Lakhs and road tax is estimated to be INR. 1.0 Lakh. Further, this car is having a useful life of 10 years and the scrap value of INR. 10.0 Lakhs. In addition to this, the car is having a potential to generate the revenues of INR. 10.0 Lakhs per annum. Whereas, the total operational expenditure is estimated to be INR. 2.0 Lakhs per annum which includes the cost of fuel & maintenance.

About Car X – This car was purchased by Mr. Kumar in year 2009 for INR. 10.0 Lakhs and the present book value of this car is INR. 3.0 Lakhs. While, the market value of this car which is enquired by Mr. Kumar is INR. 4.0 Lakhs.

Considering yourself to be the financial advisor to Mr. Kumar, assist him to:

1.  Determine the initial outflow, subsequent inflows and terminal inflow of this proposal if the rate of taxation is 10%.

2. Calculate the accounting rate of return of this proposal