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Q2) Statement Showing Calculation of Cashflow ,NPV & IRR

Solution :
Particulars
Total cash flows from
the project
Discount factor @ 10%

Year Wise Presentation of Data


Yr1
Yr2
Yr3
18500

18500

18500

0.909

0.826

0.751

16816.5

15281

13893.5

Discount factor @ 8%

0.926

0.857

0.794

Present values @ 8%
Less- Initial cash outflow
for the project

17131

15854.5

14689

Present values @ 10%


Less- Initial cash outflow
for the project
NPV @ 10%

Discount factor @ 6%
Present values @ 6%

0.9433962

0.88999644 0.839619283

17452.83 16464.93414 15532.95674

Less- Initial cash outflow


for the project
Discount factor @ 7%

0.9345794 0.873438728 0.816297877

Present values @ 7%

17289.72 16158.61647 15101.51072

Less- Initial cash outflow


for the project

ANSWER :

IRR Between 6% -7%

Yr4

Yr5

18500

18500

0.683 0.621

Yr6

Yr 7

Yr 8

Yr 9

Yr 10

18500

18500

18500

18500

0.564

0.513

0.467

0.424 0.386

18500

12635.5

11488.5

10434

9490.5

8639.5

7844

7141

0.735

0.681

0.63

0.583

0.54

0.5

0.463

13597.5

12598.5

11655

10785.5

9990

9250

8565.5

0.792093663 0.747258173
14653.73277

13824.2762

0.70496054 0.665057114 0.627412371 0.591898464 0.558394777


13041.77

12303.5566 11607.12887 10950.12158 10330.30337

0.762895212 0.712986179 0.666342224 0.622749742 0.582009105 0.543933743 0.508349292


14113.56142 13190.24432 12327.33114 11520.87022 10767.16843 10062.77424 9404.461904

Total

113664
135000
-21336

124116.5
135000
-10883.5

136161.6105
135000

129936.2585

135000
-5063.741493

Question 3
A Company is evaluating a proposal to acquire a new plant for its production department. The cost of the plant is Rs. 6,0
Solution

Particulars
Opening WDV(written down value) of the
plant
less-depreciation @10%
closing WDV of the plant

Yr1

Yr2
600000
60000
540000

Yr3
540000
54000
486000

Yr4

486000
48600
437400

437400
43740
393660

Statement showing calculation of cash flows


Particulars
Increase in EBDT
Less-Depreciation @10%
Increase in EBT
Less taxes @ 40%
Increase in EAT
Increase in cash flows after Tax
Discount factor @ 10%
Present values @ 10%
Less- Initial cash outflow for the project
NPV @ 10%
Answer :

Yr1

Yr2
125000
60000
65000
26000
39000
99000
0.909
89991

Yr3

125000
125000
125000
54000
48600
43740
71000
76400
81260
28400
30560
32504
42600
45840
48756
96600
94440
92496
0.826
0.751
0.683
79791.6 70924.44 63174.768

Hence payback period is > 10 yrs


Product is not feasible

Yr4

ent. The cost of the plant is Rs. 6,00,000. The plant has a useful life of 10 years and is expected to

Statement showing calculation of depreciation


Yr5

Yr6
393660
39366
354294

Yr 7
354294
35429.4
318864.6

318864.6
31886.46
286978.14

Yr 8

Yr 9

Yr 10

286978.14 258280.326 232452.2934


28697.814 25828.0326 23245.22934
258280.326 232452.2934 209207.0641

ion of cash flows


Yr5

Yr6

Yr 7

Yr 8

Yr 9

Yr 10

125000
125000
125000
125000
125000
125000
39366
35429.4
31886.46
28697.81
25828.03
23245.23
85634
89570.6
93113.54
96302.19
99171.97
101754.77
34253.6
35828.24
37245.416
38520.876
39668.788
40701.908
51380.4
53742.36
55868.124
57781.314
59503.182
61052.862
90746.4
89171.76
87754.584
86479.124
85331.212
84298.092
0.564
0.513
0.467
0.424 0.386
0.621
56353.5144 50292.87264 45018.10159 40385.75091 36180.43389 32539.06351

Total

564651.5449
600000
-35348.45506

Question 4

ESS EMM Company plans to acquire a machine that costs Rs. 75000. The machine has five years economic life wit
Year1
Year2
Year3
Year4
Year5
0.909
0.826
0.751
0.683
0.621
Solution :
Depreciation
Particulars
Opening WDV(written down value) of the
plant
less-depreciation
closing WDV of the plant

Particulars

13000.000 (Constant throughout)


Statement showing calculation of depreciation
Yr1
Yr2
75000.000
13000.000
62000.000

Yr3

62000.000 49000.000
13000.000 13000.000
49000.000 36000.000

Statement showing calculation of cash flows (Rs in million)


Yr1
Yr2
Yr3

Increase in EBDT
Less-Depreciation
Increase in EBT
Less taxes
EAT
Increase in cash flows after Tax
Sale of Scrap

15000.000
13000.000
2000.000
800.000
1200.000
14200.000

18000.000
13000.000
5000.000
2000.000
3000.000
16000.000

Total cashflows from the project


Discount factor @ 10%
Present values @ 10%
Less- Initial cash outflow for the project
NPV @ 10%

14200.000
0.909
12907.800

16000.000 20200.000
0.826
0.751
13216.000 15170.200

Answer :

NPV @ 10% is 3128.80

25000.000
13000.000
12000.000
4800.000
7200.000
20200.000

years economic life with a scrap value of Rs. 10000 at its expiry. The net profits before

Yr4

Yr5

36000.000 23000.000
13000.000 13000.000
23000.000 10000.000

sh flows (Rs in million)


Yr4

Yr5

Total

40000.000 20000.000
13000.000 13000.000
27000.000 7000.000
10800.000 2800.000
16200.000 4200.000
29200.000 17200.000
10000.000
29200.000 27200.000
0.683 0.621
19943.600 16891.200 78128.800
75000.000
3128.800

Q8)
Statement showing calculation of NPV @15%
Data in Million
particulars
Year wise presentation of Data
1.00
2.00
3.00
4.00
5.00
6.00
Power Generated
2.50
2.50
2.50
2.50
2.50
2.50
LESS-Commited to SEB
0.10
0.10
0.10
0.10
0.10
0.10
Available for sale
2.40
2.40
2.40
2.40
2.40
2.40
Rate/Unit
2.25
2.50
2.75
3.00
3.25
3.50
Saving in Power cost
5.40
6.00
6.60
7.20
7.80
8.40
Less-Maintenance Cost(5)
0.40
0.60
0.80
1.00
1.20
1.40
EBDT
5.00
5.40
5.80
6.20
6.60
7.00
Less-Depreciation
28.50
EBT
(23.50)
5.40
5.80
6.20
6.60
7.00
Less-taxes@35%
(8.23)
1.89
2.03
2.17
2.31
2.45
EAT
(15.28)
3.51
3.77
4.03
4.29
4.55
Cash Flow After tax(1st way)
13.23
3.51
3.77
4.03
4.29
4.55
Cash Flow After tax(2nd way)
13.23
3.51
3.77
4.03
4.29
4.55
Add-Inflows
1.50
Total Cash Inflows
14.73
3.51
3.77
4.03
4.29
4.55
Discount Factors @15%
0.87
0.76
0.66
0.57
0.50
0.43
PV of Inflows
12.80
2.65
2.48
2.30
2.13
1.97
Less-Outflow in yr 0
NPV

Total
7.00
2.50
0.10
2.40
3.75
9.00
1.60
7.40

8.00
2.50
0.10
2.40
4.25
10.20
1.80
8.40

9.00
2.50
0.10
2.40
4.75
11.40
2.00
9.40

10.00
2.50
0.10
2.40
5.25
12.60
2.20
10.40

7.40
2.59
4.81
4.81
4.81

8.40
2.94
5.46
5.46
5.46

9.40
3.29
6.11
6.11
6.11

4.81
0.38
1.81

5.46
0.33
1.78

6.11
0.28
1.74

10.40
3.64
6.76
6.76
6.76
6.00
12.76
0.25
3.15

2.25

32.83
31.50
1.33

0.87
0.76
0.66
0.57
0.50
0.43
0.38
0.33

2.50

2.75

3.00

3.25

Q9
Particulars
Opening WDV of the plant
Less-Depreciation@ 25%
Closing WDV of the Plant
Less-Sales value of the plant
Capital loss on Sale
tax Savings on capital Loss

Statement Showing Calculationof Depreciation


Yr 1
Yr2
Yr3
Yr4
Yr5
30.00
22.50
16.88
12.66
9.49
7.50
5.63
4.22
3.16
2.37
22.50
16.88
12.66
9.49
7.12
2.00
5.12
1.79

Statement Showing Calculations of Cash Flows

Yr 1
Increase in Revenues
Decrease in labour Costs
Increase in Admin Costs
Increase in Fixed Costs
Increase in Variable Costs
Loss due to Strike, Opposition
Increase in EBDT
Less-Depreciation
Incraese in EBT
Less-Taxes@35%
Increase in EAT
Increase in Cashflow after Tax
Sale of Scrap (Inflow)
Total cashflow From the Project
Discount Factor@8%
Present Value @8%
Less-Initial cash Outflow for the project
NPV @8%

Yr4

Yr5

77.25
12.40
7.80
6.80
44.50
2.00
28.55
7.50
21.05
7.37
13.68
21.18

Yr2
85.50
13.80
8.70
7.50
48.50
0.80
33.80
5.63
28.18
9.86
18.31
23.94

Yr3
93.75
15.20
9.45
8.30
53.00
0.30
37.90
4.22
33.68
11.79
21.89
26.11

102.00
16.40
10.35
9.10
57.50

110.25
17.60
11.25
9.80
62.00

41.45
3.16
38.29
13.40
24.89
28.05

21.18
0.93
19.61

23.94
0.86
20.52

26.11
0.79
20.73

28.05
0.74
20.62

44.80
2.37
42.43
14.85
27.58
29.95
3.79
33.74
0.68
22.96

Total

104.45
30.00
74.45

//WDV is written down value ie yr 1 closing val is yr 2 opening value

DF
0.93
0.86
0.79
0.74
0.68

statement showing calculation of Depreciation (Rs. In Million)

Opening WDV of the plant


Less-Depreciation@ 25%
Closing WDV of the Plant

Yr 1
150.00
37.50
112.50

Yr 2
112.50
28.13
84.38

Yr 3
84.38
21.09
63.28

Yr 4
63.28
15.82
47.46

Yr 5
47.46
11.87
35.60

Yr 1
250.00
100.00
150.00
37.50
112.50
33.75
78.75
116.25

Yr 2
250.00
100.00
150.00
28.13
121.88
36.56
85.31
113.44

Yr 3
250.00
100.00
150.00
21.09
128.91
38.67
90.23
111.33

Yr 4
250.00
100.00
150.00
15.82
134.18
40.25
93.93
109.75

Yr 5
250.00
100.00
150.00
11.87
138.13
41.44
96.69
108.56

116.25
0.91
105.68

113.44
0.83
93.75

111.33
0.75
83.64

109.75
0.68
74.96

108.56
0.62
67.41

0.77
89.42

0.59
67.12

0.46
50.67

0.35
38.43

0.27
29.24

0.74
86.11

0.55
62.24

0.41
45.25

0.30
33.04

0.22
24.21

0.65
75.00

0.42
47.22

0.27
29.90

0.17
19.01

0.11
12.13

ignoring taxes
Statement Showing Calculations of Cash Flows

Increase in Revenues
Decrease in Costs
Increase in EBDT
Less-Depreciation
Incraese in EBT
Less-Taxes@30%
Increase in EAT
Increase in Cashflow after Tax
Sale of Scrap
Recovery of WC
Total cashflow From the Project
Discount Factor@10%
Present Value @10%
Less-Initial cash Outflow for the project
NPV 10%
Discount Factor@30%
Present Value @30%
Less-Initial cash Outflow for the project
NPV 30%
Discount Factor@35%
Present Value @35%
Less-Initial cash Outflow for the project
NPV 35%
Discount Factor@55%
Present Value @55%
Less-Initial cash Outflow for the project
NPV 55%

n (Rs. In Million)
Yr 6
35.60
8.90
26.70

Yr 7
26.70
6.67
20.02

Yr 6
250.00
100.00
150.00
8.90
141.10
42.33
98.77
107.67

Yr 7
Total
250.00
100.00
150.00
6.67
143.33
43.00
100.33
107.00
48.00
50.00
205.00
0.51
105.20
591.41
200.00
391.41
0.16
32.67
329.86
200.00
129.86
0.12
25.09
293.73
200.00
93.73
0.05
9.54
200.56
200.00
0.56

107.67
0.56
60.78

0.21
22.31

0.17
17.79

0.07
7.76

Q5)
Statement Showing Calculations of Cash Flows
Particulars

Yr 1

Increase in Revenue
less Labour cost
less Material & Maintenance
less taxes
EAT
Sales of Scrap
Total cash flow
Discount Factor @12%
PV of inflows
Less-outflows in Yr0
NPV@12%

170,000.00
15,000.00
5,000.00
11,200.00
138,800.00
138800.00
0.90
124920.00

Yr2

Yr3

Yr4

170,000.00
15,000.00
5,000.00
22,720.00
127,280.00

170,000.00
15,000.00
5,000.00
27,040.00
122,960.00

170,000.00
15,000.00
5,000.00
31,360.00
118,640.00

127280.00
0.80
101824.00

122960.00
0.70
86072.00

118640.00
0.60
71184.00

Yr5
170,000.00
15,000.00
5,000.00
39,680.00
110,320.00
16000.00
126320.00
0.57
72002.40

Total

456002.40
190000.00
266002.40

Q6)
MachineK

Statement showing calculation of Cash flow


\

Particulars

Yr 1

Yr2

Yr3

EBDT
less Depreciation
EBT
less taxes
EAT
Cashflow after tax
Investment in new equipment
Sales of Scrap & Recovery of WC
Total cash flow
Discount Factor @10%
PV of inflows
Less-outflows in Yr0
NPV@10%
Profitability Index

100,000.00
24,750.00
75,250.00
22,575.00
52,675.00
77425.00

100,000.00
24,750.00
75,250.00
22,575.00
52,675.00
77425.00

100,000.00
24,750.00
75,250.00
22,575.00
52,675.00
77425.00

77425.00
0.91
70386.36

77425.00
0.83
63987.60

77425.00
0.75
58170.55

Note:- it is assumed that working capital Investment in Debtors, stock & cash is recovered after the project is complete at b
Machinel

Statement showing calculation of Cash flow


\

Particulars

Yr 1

Yr2

Yr3

EBDT
less Depreciation
EBT
less taxes
EAT
Cashflow after tax
Investment in new equipment
Sales of Scrap & Recovery of WC
Total cash flow
Discount Factor @10%
PV of inflows
Less-outflows in Yr0
NPV@10%
Profitability Index

120,000.00
23,000.00
97,000.00
29,100.00
67,900.00
90900.00

120,000.00
23,000.00
97,000.00
29,100.00
67,900.00
90900.00

120,000.00
23,000.00
97,000.00
29,100.00
67,900.00
90900.00

90900.00
0.91
82636.36

90900.00
0.83
75123.97

90900.00
0.75
68294.52

Project L is better because it gives a higher NPV and for every rupee invested the present value of inflow is higher (1.8>1,55

Yr4

Yr5

100,000.00
24,750.00
75,250.00
22,575.00
52,675.00
77425.00

100,000.00
24,750.00
75,250.00
22,575.00
52,675.00
77425.00
45000.00

100000.00
33,750.00
66,250.00
19,875.00
46,375.00
80125.00

100,000.00
33,750.00
66,250.00
19,875.00
46,375.00
80125.00

100,000.00
33,750.00
66,250.00
19,875.00
46,375.00
80125.00

77425.00
0.68
52882.32

32425.00
0.62
20133.37

80125.00
0.56
45228.47

80125.00
0.51
41116.79

80125.00
0.47
37378.90

Yr6

Yr8

Yr7

ed after the project is complete at book value

Yr4

Yr5

120,000.00
23,000.00
97,000.00
29,100.00
67,900.00
90900.00

120,000.00
23,000.00
97,000.00
29,100.00
67,900.00
90900.00
100000.00

120,000.00
43,000.00
77,000.00
23,100.00
53,900.00
96900.00

120,000.00
43,000.00
77,000.00
23,100.00
53,900.00
96900.00

120,000.00
43,000.00
77,000.00
23,100.00
53,900.00
96900.00

90900.00
0.68
62085.92

-9100.00
0.62
-5650.38

96900.00
0.56
54697.52

96900.00
0.51
49725.02

96900.00
0.47
45204.57

nt value of inflow is higher (1.8>1,55)

Yr6

Yr8

Yr7

Yr9

Yr10

100,000.00
33,750.00
66,250.00
19,875.00
46,375.00
80125.00

100,000.00
33,750.00
66,250.00
19,875.00
46,375.00
80125.00

80125.00
0.42
33980.82

60500.00
140625.00
0.39
54217.03

477482.22
308000
169482.22
1.550266963
23

Yr9

Yr10

120,000.00
43,000.00
77,000.00
23,100.00
53,900.00
96900.00

120,000.00
43,000.00
77,000.00
23,100.00
53,900.00
96900.00

96900.00
0.42
41095.06

60000.00
156900.00
0.39
60491.74

533704.30
290000
243704.30
1.840359645

Q14

Opening WDV of the plant


Less- Depreciation @ 25%
Closing WDV of the plant
Less- Sale Value of the plant
Capital loss on sale
Tax Savings on captital loss

Statement showing calculation of depreciation


Yr 1
Yr 2 Yr 3 Yr 4
Yr 5
30.00 22.50 16.88 12.66
9.49
7.50 5.63 4.22
3.16
2.37
22.50 16.88 12.66
9.49
7.12
2.00
5.12
1.79

Increase in revenues
Decrease in Costs
Increase in Admin costs
Increase in Fixed costs
Increase in Variable costs
Loss Due to Strike, Opposition
Increase in EBDT
Less - Depreciation
Increse in EBDT
Less - Taxes @ 35%
Increse in EAT
Incresase in Cashflows after tax
Sale of scrap
Total cash flows from the project
Discount factor @ 8 %
Present value @ 8%
Less- Initial Cash Outflow for the Project
NPV @ 8%

Statement Show calc of cash flow(Rs in Million)


Yr 1
Yr 2 Yr 3 Yr 4
Yr 5
Total
77.25 85.50 93.75 102.00
110.25
12.40 13.80 15.20 16.40
17.60
7.80 8.70 9.45 10.35
11.25
6.80 7.50 8.30
9.10
9.80
44.50 48.50 53.00 57.50
62.00
2.00 0.80 0.30
28.55 33.80 37.90 41.45
44.80
7.50 5.63 4.22
3.16
2.37
21.05 28.18 33.68 38.29
42.43
7.37 9.86 11.79 13.40
14.85
13.68 18.31 21.89 24.89
27.58
21.18 23.94 26.11 28.05
29.95
3.79
21.18 23.94 26.11 28.05
33.74
0.93 0.86 0.79
0.74
0.68
19.61 20.59 20.63 20.76
22.94 104.53
30.00
74.53

16000
0.826
13216

Q8)-Saraf
Yr
Particulars
1
2
3
4
5
PV of Inflows
Less-Outflow
NPV

Cash Flow
50000
70000
90000
125000
80000

Project X
DF @ 13%
0.88
0.78
0.69
0.61
0.54

PV
44247.79
54820.27
62374.51
76664.84
43420.79
281528.2
200000
81528.21

Yr
Particulars Cash Flow
1
65000
2
95000
3
110000
4
70000
5
45000
PV of Inflows
Less-Outflow
NPV

Project Y

Solution: Since both the risks are nullified,hence according to NPV project X is better

After brining the effect of risks at same level for both the projects using risk adjusting discounting rate(RADR) the NPV's
comparable. So given the same level of Risk's we select the project that has a better NPV that is Project X.

Project Y
DF @ 15%
0.87
0.76
0.66
0.57
0.50

PV
56521.73913
71833.64839
72326.78557
40022.72719
22372.95309
263077.8534
200000
63077.85337

ng discounting rate(RADR) the NPV's are


s a better NPV that is Project X.

Certain cash flow= cash flow* certanity equivalent


Q9)-saraf
(Rs in 000's)
Yr
Project A
Particulars
Cash Flow
Cash Equivalent(CE) Risk Free Cash Flow DF @ 8%
1
15.00
0.60
9.00
0.93
2
10.00
0.80
8.00
0.86
3
7.00
0.70
4.90
0.79
4
8.00
0.60
4.80
0.74
5
12.00
0.90
10.80
0.68
PV of Inflows
Less-Outflow
NPV

is better because it ahs higher NPV after adjusting the cashflow for risk

PV
8.33
6.86
3.89
3.53
7.35
29.96
25.00
4.96

Yr
Project B
Particulars Cash Flow Cash Equivalent(CE) Risk Free Cash Flow DF @ 8%
1
7.00
0.90
6.30
0.93
2
9.00
0.60
5.40
0.86
3
12.00
0.80
9.60
0.79
4
15.00
0.60
9.00
0.74
5
25.00
0.70
17.50
0.68
PV of Inflows
Less-Outflow
NPV

PV
5.83
4.63
7.62
6.62
11.91
36.61
25.00
11.61

Q10) Saraf
i)
Yr
Particulars
1
2
3
4
5
PV of Inflows
Less-Outflow
NPV

Calculation of NPV at existing Cost of 80000

ii)

Calculation of NPV at existing Cost of 85600

Yr
Particulars
1
2
3
4
5
PV of Inflows
Less-Outflow
NPV
Change in NPV
Change in NPV(%)

Cash Flow

Project X
DF @ 10%
20.00
0.91
30.00
0.83
40.00
0.75
20.00
0.68
10.00
0.62

Project X
Cash Flow
DF @ 10%
20.00
0.91
30.00
0.83
40.00
0.75
20.00
0.68
10.00
0.62

PV
18.18
24.79
30.05
13.66
6.21
92.90
80.00
12.90

PV
18.18
24.79
30.05
13.66
6.21
92.90
85.60
7.30
5.60
43.42

Conclusion: NPV will reduce by 5,600 but in percentage terms the drop will be 43.2 percent for machine x and for machine
Despite the increase in the cost both the Project's will still be profitable( because NPV positive)

(Rs in 000's)
Yr
Particulars
1
2
3
4
5
PV of Inflows
Less-Outflow
NPV

Project Y
Cash Flow DF @ 10%
10.00
0.91
30.00
0.83
40.00
0.75
30.00
0.68
20.00
0.62

PV
9.09
24.79
30.05
20.49
12.42
96.85
80.00
16.85

(Rs in 000's)
Yr
Particulars
1
2
3
4
5
PV of Inflows
Less-Outflow
NPV
Change in NPV
Change in NPV(%)

cash Flow
10.00
30.00
40.00
30.00
20.00

Project Y
DF @ 10%
0.91
0.83
0.75
0.68
0.62

PV
9.09
24.79
30.05
20.49
12.42
96.85
85.60
11.25
5.60
33.24

3.2 percent for machine x and for machine Y the drop would be 33.24%
e NPV positive)

Q11-Saraf
(Rs in 000's)
Calculation of NPV for project A & B
Yr
Particulars
1
2
3
4
5
PV of Inflows
Less-Outflow
NPV

Cash Flow
40.00
50.00
60.00
35.00
30.00

Probability
0.20
0.20
0.10
0.30
0.20

Project A
Expected CashFlow
8.00
10.00
6.00
10.50
6.00

DF @ 10%
0.91
0.83
0.75
0.68
0.62

PV
7.27
8.26
4.51
7.17
3.73
30.94
20.00
10.94

Explanation :
// Summation of probability will always be 1 but in certainity equivalent it will not necessarily will be 1 because its % of oc
//CE cash flow at regular intervals+ all recoveries in year 1 or year 2 or ear 3 itself so its probability
//cumulative probability after discounting
//CE-Certain cashflow-How much u will recover
//Probability -when will u recover money

Yr
Particulars
1
2
3
4
5
PV of Inflows
Less-Outflow
NPV

arily will be 1 because its % of occurrence

Cash Flow
60.00
45.00
30.00
20.00
15.00

Probability
0.10
0.15
0.25
0.20
0.30

Project B
Expected CashFlow
DF @ 10%
6.00
0.91
6.75
0.83
7.50
0.75
4.00
0.68
4.50
0.62

PV
5.45
5.58
5.63
2.73
2.79
22.19
18.00
4.19

Q12-Saraf
//Assumption- Assume Inflow in the First year
Yr
Particulars

Project A
Event Cash Flow Event Probability Expected CashFlow DF @ 12%
1
15.00
0.30
4.50
0.89
2
20.00
0.40
8.00
0.89
3
40.00
0.30
12.00
0.89
PV of Inflows
1.00
Less-Outflow
NPV

Conclusion: Both the machines would be rejected because negative NPV

PV
4.02
7.14
10.71
21.88
25.00
-3.13

Yr
Particulars

PV of Inflows
Less-Outflow
NPV

Project B
Event Cash Flow Event Probability Expected CashFlow DF @ 12%
1
10.00
0.40
4.00
0.89
2
18.00
0.30
5.40
0.89
3
35.00
0.30
10.50
0.89

PV
3.57
4.82
9.38
17.77
25.00
-7.23

Particulars
Selling Price per unit
Less - Variable Cost per Unit
Contribution per unit
Qty Sold
Total Contribution
Less - Fixed Cost
EBDT
Less - Depreciation
EBT
Tax @50%
EAT
Cashflow after Tax
PVAF (5 yrs, 10%)
PV of Inflows
Initial Outflows
NPV
Change in NPV
change in NPV (%)

Normal
Optimistic
Pessimistic
30.00
50.00
40.00
20.00
15.00
25.00
10.00
35.00
15.00
1,400.00
1,800.00
800.00
14,000.00
63,000.00
12,000.00
3,000.00
3,000.00
3,000.00
11,000.00
60,000.00
9,000.00
2,000.00
2,000.00
2,000.00
9,000.00
58,000.00
7,000.00
4,500.00
29,000.00
3,500.00
4,500.00
29,000.00
3,500.00
6,500.00
31,000.00
5,500.00
3.79
3.79
3.79
24,640.11 117,514.39
20,849.33
30,000.00
30,000.00
30,000.00
(5,359.89)
87,514.39
(9,150.67)
92,874.28
(3,790.79)
-1733%
71%

Discount factors for 5 years


0.909090909
0.826446281
0.751314801
0.683013455
0.620921323

to
//PVAF = PV Annuity Factor

Q10- Initial Doc

Statement Showing Working Capital Estimations


Particulars
Amount (Rs)
Production (Units)
104,000
Current Assets
Raw Material Stock
640,000.00
// work in progree partly convergence pa
Work in Progress
500,000.00
//incurred cost-50% &production proces
Finished Goods Stock
1,360,000.00
//170 becoz all the cost would have been incurred in
Sundry Debtors
2,720,000.00
170 becoz its the invstmnt and profir margin is not i
Cash Balance
25,000.00
// cash in th bank
Sub Total
5,245,000.00

Current Liabilities
Suppliers Credit
Wages Payable
Sub Total
Working Capital Investment
Add-Contingencies 10%
Total Working Capital Investment

640,000.00
90,000.00

//the time RM is in st
730,000.00
4,515,000.00
451,500.00
4,966,500.00

progree partly convergence partly material cost


cost-50% &production process- 2weeks
t would have been incurred in it
tmnt and profir margin is not invstmnt

two weeks to complete the finish good


// includes raw material in store
//conversion cost is all the costs excluding raw material cost
// take total cost for FG

//if OH given inclusive of depreciaton then take 90-10 in WIP

//the time RM is in stock, for the same time credit is given, hence, no investment in this case. Paying him only when RM gets con
//Production process is of 2 weeks

w material cost

ke 90-10 in WIP

Paying him only when RM gets converted to WIP.

Q11.

Opening WDV of the plant


Less- Depreciation @ 25%
Closing WDV of the plant

Statement showing calculation of depreciation


Yr 1
Yr 2
150.00 112.50
37.50 28.13
112.50 84.38

Statement Show calc of cash flow


Yr 1
Increase in revenues
Increase in Costs
Increase in EBDT
Less - Depreciation
Increse in EBDT
Less - Taxes
Increse in EAT
Incresase in Cashflows after tax
Sale of scrap
Recovery of WC
Total cash flows from the project
Discount factor @ 10 %
Present value @ 10%
Less- Initial cash outflow for the project
NPV @ 10%
Discount factor @ 15 %
Present value @ 15%
Discount factor @ 25 %
Present value @ 25%
Discount factor @ 55 %
Present value @ 55%

250.00
100.00
150.00
37.50
112.50
33.75
78.75
116.25

Yr 2
250.00
100.00
150.00
28.13
121.88
36.56
85.31
113.44

116.25 113.44
0.91
0.83
105.79 93.84

0.87
101.09
0.80
93.00
0.65
75.00

0.76
85.78
0.70
65.28
0.42
47.22

Yr 3
Yr 4
Yr 5
84.38 63.28
21.09 15.82
63.28 47.46

Yr 3
250.00
100.00
150.00
21.09
128.91
38.67
90.23
111.33

(Rs in Million)
Yr 4
Yr 5
250.00
250.00
100.00
100.00
150.00
150.00
15.82
11.87
134.18
138.13
40.25
41.44
93.93
96.69
109.75
108.56

111.33 109.75
0.75
0.68
83.73 75.03

0.66
73.20
0.60
50.65
0.27
29.90

47.46
11.87
35.60

0.57
62.75
0.53
39.47
0.17
19.01

Yr 6
Yr 7
35.60 26.70
8.90
6.67
26.70 20.02

Yr 6
250.00
100.00
150.00
8.90
141.10
42.33
98.77
107.67

Yr 7
Total
250.00
100.00
150.00
6.67
143.33
43.00
100.33
107.00
48.00
50.00
108.56 107.67 205.00
0.62
0.57
0.51
67.47 60.84 105.30 592.01
200
392.01
0.50
0.43
0.38
53.97 46.55 77.07 500.40
0.46
0.40
0.35
30.86 24.20 36.42 339.88
0.11
0.07
0.05
12.13
7.76
9.54 200.56

Q11) Doc

A)

B)

Add -

Working Note:

Statement Showing Working Capital Estimations


Particulars
Amount (Rs)
Production (Units)
Current Assets
Raw Material Stock
161,000.00
Work in Progress
163,500.00
Finished Goods Stock
146,500.00
Sundry Debtors
211,800.00
Advance Tax
17,500.00
Cash Balance
40,000.00
Sub Total
740,300.00

Current Liabilities
Suppliers Credit
Expenses Payable
Sub Total

140,875.00
74,583.33
215,458.33

Working Capital Investment


Contingencies 10%
Total Working Capital Investment

524,841.67
52,484.17
577,325.83

1) Calculation of WIP
Material component
Wages & Manufacturing
Value of WIP

126,000.00
37,500.00
163,500.00

2) Calculation of RM Stock
Consumed for FG
Consumed for In Process
Total Consumption ofmaterials
Raw material Stock

840,000.00
126,000.00
966,000.00
161,000.00

3) Expenses Payable
Wages & Manufacturing
Administration Expenses
Selling Expenses
Total Expenses
Expenses Payable (per month)

625,000.00
140,000.00
130,000.00
895,000.00
74,583.33

4) Suppliers Credit
Total Material Consumed

966,000.00

//15% of the year production=15

// Rm amt for 1 month


// total RM = amt converted into

// Average time lag in payment o

// Suppliers of materials extend 1

Add - Stock of Materials maintained


Total Materials Purchased
Suppliers Credit

161,000.00
1,127,000.00
140,875.00

5) Sundry Debtors
Cost of Goods Sold
Cost of Goods Produced
90% of the above (being sold)
Administration Expenses
Selling Expenses
Total Cost of Goods Sold
Total Cost of Goods Sold on Credit
Sundry Debtors

1,465,000.00
1,318,500.00
140,000.00
130,000.00
1,588,500.00
1,270,800.00
211,800.00

//material consumed + material m

//10% not yet sold

//two months credit

Assumptions:
1. Finished goods unsold are vaued at Cost of Production
2. Finished goods sold are valued at Cost of production + Admin & Seling exp
3. profit & Tax thereon are accruing evenly during the year

//in this case work out WIP first and then raw material
//depreciation is removed coz it doesn't lead to any cash expenses
//70% of income tax has to be paid in advance in quarterly installment
provision for tax =100000// 100000 has to be paid as tax

of the year production=15% of 840000

amt for 1 month


RM = amt converted into FG + amt which is currently in process (i.e. amt for 1 month)

age time lag in payment of all expense sis one month

pliers of materials extend 1.5 month credit

rial consumed + material maintained

not yet sold

months credit