Particulars

Revenue
Variable Cost 30%
(-)
Profit before Dep'n & Tax
Depreciation
(-)
Profit before Tax
Tax @ 35%
(-)
Profit After Tax
Depreciation
(+)
Cash Flow After Tax
P.V. Factor
(x)
P.V. of Inflow

Calculation of Present Value of Inflow: (Rs. In Lacs)

1 Year
2 Year
3 Year
4 Year
(Rs.)
(Rs.)
(Rs.)
(Rs.)
5
5
5
5
1.5
1.5
1.5
1.5
3.5
3.5
3.5
3.5
3.25
2.44
1.83
1.37
0.25
1.06
1.67
2.13
0.09
0.37
0.58
0.75
0.16
0.69
1.09
1.38
3.25
2.44
1.83
1.37
3.41
3.13
2.92
2.75
0.91
0.83
0.75
0.68
3.11
2.58
2.19
1.88

Summary:
P.V. of Inflow in 6 Years
Salvage (1.5 x 0.56)
(+)
Working Cap. (1 x 0.56) (+)
Initial Outflow in Zero Years
Net P.V.

12.76
0.84
0.56
14.16
14.00
0.16

Recommendation:
NPV is positive, therefor project is viable.
Solution: Assuming salvage value is zero
working for year 1 to 5 will remain same & for 6th year
6th year
Dep'n

Particulars
Revenue
Variable Cost 30%
(-)
Profit before Dep'n & Tax
Depreciation
(-)
Profit before Tax
Tax @ 35%
(-)
Profit After Tax
Depreciation
(+)
Cash Flow After Tax
P.V. Factor
(x)
P.V. of Inflow

3.08
0.77
2.31
6 Year
5
1.5
3.5
0.77
2.73
0.96
1.77
0.77
2.54
0.56
1.44

Revised summary assuming Salvage value is Zero:

P.V. of inflow in 6 years

12.83

-25%

5 Year
(Rs.)
5
1.5
3.5
1.03
2.47
0.86
1.61
1.03
2.64
0.62
1.64

Salvage value
Working Cap. (1x0.56)
Initial Outflow in zero years
NPV

0
0.56
13.39
14.00
-0.61

Recommendation:
NPV is Negative thefore, project is not viable.

s)
6 Year
(Rs.)
5
1.5
3.5
0.39
3.11
1.09
2.02
0.39
2.41
0.56
1.36

12.76