STRATEGIC PLANNING LECTURE

by
Prof. Dr. R. GOPAL.
Chapter 6

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Sessions Plan for Strategic Management.

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Sessions Plan for Strategic Management.

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The Net Present Value is a function of several factors

Net Present Value
Cash Flow growth after
5 years

Time Horizon

Cash Flow

Cost of Capital

Technology Life-cycle

Interest

PBT

Working
Capital Days
(90)@

Depreciation
Asset
Base

Sales
Pricing 1
Costs 2

Debtor
Days (75)@

Strategic Planning lecture

Productivity
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Depn.
method

Export / Domestic
mix (100% domestic)

Creditor
Days (45)@

SLM

Cost of Equity
Cost of L.T. Loans
Cost of Borrowings

WDV
Inventory
Days (60)@

Capacity
Utilization

Tax Rate

Source of funds - debt

Source of funds - equity
Source of funds -cash

1)

Refer price policy = 7 price increase

2)

Refer Cost structure analysis = 5%

increase

3)

Product Life Cycle = 10 years (assumption)

4)

Cost of capital =17.5%

5)

Cost of equity = 17%

6)

Cost of LT Loans = 17%

7)

Cost of ST Borrowings = 18%

8)

@ = in no of days.
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The Net Present Value is a function of several factors

Net Present Value

Cash Flow

PBT

Time Horizon

Interest

Cash Flow growth

Depreciation

Cost of capital

Tax Rate

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Components of the Net Present Value

Profit Before Deprecian, Interest

and Tax (PBDIT):
Sales Quantity, Price
Capacity Utilization
Productivity

Interest:

Fixed Assets

Working Capital:
Inventory, Debtors.
Creditors

Costs etc

Depreciation:

Cost of Capital:

Asset based

Equity

Depreciation Method

Long Term Borrowings

Strategic Planning lecture

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Short Term Borrowigs.

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THANK YOU FOR THE PATIENT LISTENING

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