POTOHAR STEEL

Initial Cost

80000000

End of years
Cash flows
Less:
Tax Depriciation
EBIT
Tax @18.5%
EAIT
Add:
Tax Depriciation
Net Cash Flows

0
1
2
3
4
5
6
7
80000000 16000000 20000000 24000000 28000000 32000000 36000000 40000000
26664000 35560000 11896000 5928000
0
0
0
-10664000 -15560000 12104000 22072000 32000000 36000000 40000000
-1972840 -2878600 2239240 4083320 5920000 6660000 7400000
-8691160 -12681400 9864760 17988680 26080000 29340000 32600000
26664000 35560000 11896000 5928000
0
0
0
17972840 22878600 21760760 23916680 26080000 29340000 32600000

P.V of cash inflows
@17.1%
P.V of cash outflow
NPV

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PI

1.15

If
P.V of cash inflows
@22%
P.V of cash outflow
NPV

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###

###

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=

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rl+ (rh-rl)(P.V.L - P.V.Y) / (P.V.L – P.V.H)
0.19

Debt:
Equity:

Amount of finance Proportion
56000000
70%
24000000
30%
100%

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80000000
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80000000
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Its >1 so we accept the Project

Now
IRR

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Cost
Weighted Cost
15%
10.50%
22%
6.600%
17.100%

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