Investment 10,000.

00
Sales Volume 1,000.00
Price 15.00
Variable cost 6.75
Fixed Cost 4,000.00
Depreciation WDV 0.25
Income Tax 0.35
Discount Rate 0.12

Cashflows
Year 0.00 1.00 2.00 3.00 4.00 5.00
Sales 15,000.00 15,000.00 15,000.00 15,000.00 15,000.00
Variable Cost 6,750.00 6,750.00 6,750.00 6,750.00 6,750.00
Fixed Cost 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
EBDIT 4,250.00 4,250.00 4,250.00 4,250.00 4,250.00
Investment Value 10,000.00 7,500.00 5,625.00 4,218.75 3,164.06 2,373.05
Depreciation 2,500.00 1,875.00 1,406.25 1,054.69 791.02
EBIT 1,750.00 2,375.00 2,843.75 3,195.31 3,458.98
Tax 612.50 831.25 995.31 1,118.36 1,210.64
PAT 1,137.50 1,543.75 1,848.44 2,076.95 2,248.34
Cashflow -10,000.00 3,637.50 3,418.75 3,254.69 3,131.64 3,039.36
PV -10,000.00 3,247.77 2,725.41 2,316.62 1,990.21 1,724.61
NPV 5,040.78
IRR 0.1354

Price falls by 11.5%

Investment 10,000.00
Sales Volume 1,000.00
Price 15.00
Variable cost 6.75
Fixed Cost 4,000.00
Depreciation WDV 0.25
Income Tax 0.35
Discount Rate 0.12

Cashflows
Year 0.00 1.00 2.00 3.00 4.00 5.00
Sales 13,305.00 13,305.00 13,305.00 13,305.00 13,305.00
Variable Cost 6,750.00 6,750.00 6,750.00 6,750.00 6,750.00
Fixed Cost 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
EBDIT 2,555.00 2,555.00 2,555.00 2,555.00 2,555.00
Investment Value 10,000.00 7,500.00 5,625.00 4,218.75 3,164.06 2,373.05
Depreciation 2,500.00 1,875.00 1,406.25 1,054.69 791.02
EBIT 55.00 680.00 1,148.75 1,500.31 1,763.98
Tax 19.25 238.00 402.06 525.11 617.39
PAT 35.75 442.00 746.69 975.20 1,146.59
Cashflow -10,000.00 2,535.75 2,317.00 2,152.94 2,029.89 1,937.61
PV -10,000.00 2,264.06 1,847.10 1,532.42 1,290.03 1,099.45
NPV 12.66

Variable cost goes up by 25%

Investment 10,000.00
Sales Volume 1,000.00
Price 15.00
Variable cost 6.75
Fixed Cost 4,000.00
Depreciation WDV 0.25
Income Tax 0.35
Discount Rate 0.12

Cashflows
Year 0.00 1.00 2.00 3.00 4.00 5.00
Sales 15,000.00 15,000.00 15,000.00 15,000.00 15,000.00
Variable Cost 8,437.50 8,437.50 8,437.50 8,437.50 8,437.50
Fixed Cost 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
EBDIT 2,562.50 2,562.50 2,562.50 2,562.50 2,562.50
Investment Value 10,000.00 7,500.00 5,625.00 4,218.75 3,164.06 2,373.05
Depreciation 2,500.00 1,875.00 1,406.25 1,054.69 791.02
EBIT 62.50 687.50 1,156.25 1,507.81 1,771.48
Tax 21.88 240.63 404.69 527.73 620.02
PAT 40.63 446.88 751.56 980.08 1,151.46
Cashflow -10,000.00 2,540.63 2,321.88 2,157.81 2,034.77 1,942.48
PV -10,000.00 2,268.42 1,850.98 1,535.89 1,293.13 1,102.22
NPV 34.91

Fixed cost goes up by 42.5%

Investment 10,000.00
Sales Volume 1,000.00
Price 15.00
Variable cost 6.75
Fixed Cost 4,000.00
Depreciation WDV 0.25
Income Tax 0.35
Discount Rate 0.12

Cashflows
Year 0.00 1.00 2.00 3.00 4.00 5.00
Sales 15,000.00 15,000.00 15,000.00 15,000.00 15,000.00
Variable Cost 6,750.00 6,750.00 6,750.00 6,750.00 6,750.00
Fixed Cost 5,700.00 5,700.00 5,700.00 5,700.00 5,700.00
EBDIT 2,550.00 2,550.00 2,550.00 2,550.00 2,550.00
Investment Value 10,000.00 7,500.00 5,625.00 4,218.75 3,164.06 2,373.05
Depreciation 2,500.00 1,875.00 1,406.25 1,054.69 791.02
EBIT 50.00 675.00 1,143.75 1,495.31 1,758.98
Tax 17.50 236.25 400.31 523.36 615.64
PAT 32.50 438.75 743.44 971.95 1,143.34
Cashflow -10,000.00 2,532.50 2,313.75 2,149.69 2,026.64 1,934.36
PV -10,000.00 2,261.16 1,844.51 1,530.11 1,287.97 1,097.61
NPV -2.17

Income Tax rate goes up by 115%

Investment 10,000.00
Sales Volume 1,000.00
Price 15.00
Variable cost 6.75
Fixed Cost 4,000.00
Depreciation WDV 0.25
Income Tax 0.35
Discount Rate 0.12

Cashflows
Year 0.00 1.00 2.00 3.00 4.00 5.00
Sales 15,000.00 15,000.00 15,000.00 15,000.00 15,000.00
Variable Cost 6,750.00 6,750.00 6,750.00 6,750.00 6,750.00
Fixed Cost 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
EBDIT 4,250.00 4,250.00 4,250.00 4,250.00 4,250.00
Investment Value 10,000.00 7,500.00 5,625.00 4,218.75 3,164.06 2,373.05
Depreciation 2,500.00 1,875.00 1,406.25 1,054.69 791.02
EBIT 1,750.00 2,375.00 2,843.75 3,195.31 3,458.98
Tax 1,316.88 1,787.19 2,139.92 2,404.47 2,602.89
PAT 433.13 587.81 703.83 790.84 856.10
Cashflow -10,000.00 2,933.13 2,462.81 2,110.08 1,845.53 1,647.11
PV -10,000.00 2,618.86 1,963.34 1,501.91 1,172.87 934.62
NPV 32.32

Sensitivity Table
Volume 11.30%
Price 11.30%
Direct Cost 25%
Indirect Cost 42.50%
Income Tax rate 112%
NPV Break Even
Analysis
Sensitivity analysis Value for NPV=0 % change
sales Volume 794 -0.21
Salews Price 13.3 -0.11
Variable Cost 8.45 0.25
Fixed Cost 5699 0.42
Income Tax 0.76 1.17

Investment 10,000.00
Sales Volume 1,000
Price 15.00
Variable cost 6.75
Fixed Cost 4,000
Depreciation WDV 0.25
Income Tax 0.35
Discount Rate 0.12

Cashflows
Year 0.00 1.00 2.00 3.00 4.00 5.00
Sales 15,000.00 15,000.00 15,000.00 15,000.00 15,000.00
Variable Cost 6,750.00 6,750.00 6,750.00 6,750.00 6,750.00
Fixed Cost 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
EBDIT 4,250.00 4,250.00 4,250.00 4,250.00 4,250.00
Investment Value 10,000.00 7,500.00 5,625.00 4,218.75 3,164.06 2,373.05
Depreciation 2,500.00 1,875.00 1,406.25 1,054.69 791.02
EBIT 1,750.00 2,375.00 2,843.75 3,195.31 3,458.98
Tax 612.50 831.25 995.31 1,118.36 1,210.64
PAT 1,137.50 1,543.75 1,848.44 2,076.95 2,248.34
Cashflow -10,000.00 3,637.50 3,418.75 3,254.69 3,131.64 3,039.36
PV -10,000.00 3,247.77 2,725.41 2,316.62 1,990.21 1,724.61
NPV 5,040.78
IRR 0.1354
 Sales volume falls by 11%

Investment 10,000.00
Sales Volu 1,000.00
Price 15.00
Variable co 6.75
Fixed Cost 4,000.00
Depreciat 0.25
Income Tax 0.35
Discount R 0.12

Cashflows
6.00 7.00 Year 0.00 1.00 2.00 3.00
15,000.00 15,000.00 Sales 13,305.00 13,305.00 13,305.00
6,750.00 6,750.00 Variable Cost 6,750.00 6,750.00 6,750.00
4,000.00 4,000.00 Fixed Cost 4,000.00 4,000.00 4,000.00
4,250.00 4,250.00 EBDIT 2,555.00 2,555.00 2,555.00
1,779.79 0.00 Investment 10,000.00 7,500.00 5,625.00 4,218.75
593.26 1,779.79 Depreciation 2,500.00 1,875.00 1,406.25
3,656.74 2,470.21 EBIT 55.00 680.00 1,148.75
1,279.86 864.58 Tax 19.25 238.00 402.06
2,376.88 1,605.64 PAT 35.75 442.00 746.69
2,970.14 3,385.42 Cashflow -10,000.00 2,535.75 2,317.00 2,152.94
1,504.77 1,531.39 PV -10,000.00 2,264.06 1,847.10 1,532.42
NPV 12.66

6.00 7.00
13,305.00 13,305.00
6,750.00 6,750.00
4,000.00 4,000.00
 2,555.00 2,555.00
1,779.79 0.00
593.26 1,779.79
1,961.74 775.21
686.61 271.33
1,275.13 503.89
1,868.39 2,283.67
946.59 1,033.02

6.00 7.00
15,000.00 15,000.00
8,437.50 8,437.50
4,000.00 4,000.00
2,562.50 2,562.50
1,779.79 0.00
593.26 1,779.79
1,969.24 782.71
689.23 273.95
1,280.00 508.76
1,873.27 2,288.55
949.06 1,035.22
 6.00 7.00
15,000.00 15,000.00
6,750.00 6,750.00
5,700.00 5,700.00
2,550.00 2,550.00
1,779.79 0.00
593.26 1,779.79
1,956.74 770.21
684.86 269.58
1,271.88 500.64
1,865.14 2,280.42
944.94 1,031.55

6.00 7.00
15,000.00 15,000.00
6,750.00 6,750.00
4,000.00 4,000.00
4,250.00 4,250.00
1,779.79 0.00
593.26 1,779.79
3,656.74 2,470.21
2,751.70 1,858.84
905.04 611.38
1,498.30 2,391.16
759.09 1,081.64
 6.00 7.00
15,000.00 15,000.00
6,750.00 6,750.00
4,000.00 4,000.00
4,250.00 4,250.00
1,779.79 0.00
593.26 1,779.79
3,656.74 2,470.21
1,279.86 864.58
2,376.88 1,605.64
2,970.14 3,385.42
1,504.77 1,531.39
 4.00 5.00 6.00 7.00
13,305.00 13,305.00 13,305.00 13,305.00
6,750.00 6,750.00 6,750.00 6,750.00
4,000.00 4,000.00 4,000.00 4,000.00
2,555.00 2,555.00 2,555.00 2,555.00
3,164.06 2,373.05 1,779.79 0.00
1,054.69 791.02 593.26 1,779.79
1,500.31 1,763.98 1,961.74 775.21
525.11 617.39 686.61 271.33
975.20 1,146.59 1,275.13 503.89
2,029.89 1,937.61 1,868.39 2,283.67
1,290.03 1,099.45 946.59 1,033.02
Scenario Summary
Current Values: Pessimistic Optimistic Expected
Changing Cells:
$B$3 1,000.00 750.00 1,250.00 1,250.00
$B$4 15.00 12.75 16.50 13.50
$B$5 6.75 7.43 6.75 7.10
$B$6 4,000.00 4,800.00 3,200.00 4,400.00
Result Cells:
$B$24 5,040.78 -9,969.41 19,094.30 3,112.60
Notes: Current Values column represents values of changing cells at
time Scenario Summary Report was created. Changing cells for each
scenario are highlighted in gray.
Investment 10,000.00
Sales Volume 750.00
Price 12.75
Variable cost 7.43
Fixed Cost 4,800.00
Depreciation WDV 0.25
Income Tax 0.35
Discount Rate 0.12

Cashflows
Year 0.00 1.00 2.00 3.00 4.00 5.00 6.00
Sales 9,562.50 9,562.50 9,562.50 9,562.50 9,562.50 9,562.50
Variable Cost 5,572.50 5,572.50 5,572.50 5,572.50 5,572.50 5,572.50
Fixed Cost 4,800.00 4,800.00 4,800.00 4,800.00 4,800.00 4,800.00
EBDIT -810.00 -810.00 -810.00 -810.00 -810.00 -810.00
Investment Value 10,000.00 7,500.00 5,625.00 4,218.75 3,164.06 2,373.05 1,779.79
Depreciation 2,500.00 1,875.00 1,406.25 1,054.69 791.02 593.26
EBIT -3,310.00 -2,685.00 -2,216.25 -1,864.69 -1,601.02 -1,403.26
Tax -1,158.50 -939.75 -775.69 -652.64 -560.36 -491.14
PAT -2,151.50 -1,745.25 -1,440.56 -1,212.05 -1,040.66 -912.12
Cashflow -10,000.00 348.50 129.75 -34.31 -157.36 -249.64 -318.86
PV -10,000.00 311.16 103.44 -24.42 -100.00 -141.66 -161.54
NPV -9,969.41
IRR Err:523

Key Variables Pessimistic Optimistic Expected

Sales Volume 750.00 1,250.00 1,250.00
Price 12.75 16.50 13.50
Variable cost 7.43 6.75 7.10
Fixed Cost 4,800.00 3,200.00 4,400.00
 7.00
9,562.50
5,572.50
4,800.00
-810.00
0.00
1,779.79
-2,589.79
-906.42
-1,683.36
96.42
43.62
Scenario Analysis
Scenario A : Base Values

Investment 10,000.00
Sales Volume 1,000.00
Price 15.00
Variable cost 6.75
Fixed Cost 4,000.00
Depreciation WDV 0.25
Income Tax 0.35
Discount Rate 0.12

Cashflows
Year 0.00 1.00 2.00 3.00 4.00
Sales 15,000.00 15,000.00 15,000.00 15,000.00
Variable Cost 6,750.00 6,750.00 6,750.00 6,750.00
Fixed Cost 4,000.00 4,000.00 4,000.00 4,000.00
EBDIT 4,250.00 4,250.00 4,250.00 4,250.00
Investment Value 10,000.00 7,500.00 5,625.00 4,218.75 3,164.06
Depreciation 2,500.00 1,875.00 1,406.25 1,054.69
EBIT 1,750.00 2,375.00 2,843.75 3,195.31
Tax 612.50 831.25 995.31 1,118.36
PAT 1,137.50 1,543.75 1,848.44 2,076.95
Cashflow -10,000.00 3,637.50 3,418.75 3,254.69 3,131.64
PV -10,000.00 3,247.77 2,725.41 2,316.62 1,990.21
NPV 5,040.78
IRR 0.1354
Scenario B : Pessimistic

Investment 10,000.00
Sales Volume 750.00
Price 12.75
Variable cost 7.43
Fixed Cost 4,800.00
Depreciation WDV 0.25
Income Tax 0.35
Discount Rate 0.12

Cashflows
Year 0.00 1.00 2.00 3.00 4.00
Sales 9,562.50 9,562.50 9,562.50 9,562.50
Variable Cost 5,572.50 5,572.50 5,572.50 5,572.50
Fixed Cost 4,800.00 4,800.00 4,800.00 4,800.00
EBDIT -810.00 -810.00 -810.00 -810.00
Investment Value 10,000.00 7,500.00 5,625.00 4,218.75 3,164.06
Depreciation 2,500.00 1,875.00 1,406.25 1,054.69
EBIT -3,310.00 -2,685.00 -2,216.25 -1,864.69
Tax -1,158.50 -939.75 -775.69 -652.64
PAT -2,151.50 -1,745.25 -1,440.56 -1,212.05
Cashflow -10,000.00 348.50 129.75 -34.31 -157.36
PV -10,000.00 311.16 103.44 -24.42 -100.00
NPV -9,969.41
IRR

Scenario C: Optimistic

Investment 10,000.00
Sales Volume 1,250.00
Price 16.50
Variable cost 6.75
Fixed Cost 3,200.00
Depreciation WDV 0.25
Income Tax 0.35
Discount Rate 0.12

Cashflows
Year 0.00 1.00 2.00 3.00 4.00
Sales 20,625.00 20,625.00 20,625.00 20,625.00
Variable Cost 8,437.50 8,437.50 8,437.50 8,437.50
Fixed Cost 3,200.00 3,200.00 3,200.00 3,200.00
EBDIT 8,987.50 8,987.50 8,987.50 8,987.50
Investment Value 10,000.00 7,500.00 5,625.00 4,218.75 3,164.06
Depreciation 2,500.00 1,875.00 1,406.25 1,054.69
EBIT 6,487.50 7,112.50 7,581.25 7,932.81
Tax 2,270.63 2,489.38 2,653.44 2,776.48
PAT 4,216.88 4,623.13 4,927.81 5,156.33
Cashflow -10,000.00 6,716.88 6,498.13 6,334.06 6,211.02
PV -10,000.00 5,997.21 5,180.27 4,508.46 3,947.21
NPV 19,094.30
IRR 62.82%
Scenario D: Expected

Investment 10,000.00
Sales Volume 1,250.00
Price 13.50
Variable cost 7.10
Fixed Cost 4,400.00
Depreciation WDV 0.25
Income Tax 0.35
Discount Rate 0.12

Cashflows
Year 0.00 1.00 2.00 3.00 4.00
Sales 16,875.00 16,875.00 16,875.00 16,875.00
Variable Cost 8,875.00 8,875.00 8,875.00 8,875.00
Fixed Cost 4,400.00 4,400.00 4,400.00 4,400.00
EBDIT 3,600.00 3,600.00 3,600.00 3,600.00
Investment Value 10,000.00 7,500.00 5,625.00 4,218.75 3,164.06
Depreciation 2,500.00 1,875.00 1,406.25 1,054.69
EBIT 1,100.00 1,725.00 2,193.75 2,545.31
Tax 385.00 603.75 767.81 890.86
PAT 715.00 1,121.25 1,425.94 1,654.45
Cashflow -10,000.00 3,215.00 2,996.25 2,832.19 2,709.14
PV -10,000.00 2,870.54 2,388.59 2,015.90 1,721.71
NPV 3,112.60
IRR 21.64%

Scenario Analysis
Scenario Probability NPV
Pessimistic 25% -9,969.41
Optimistic 25% 19,094.30
Expected 50% 3,112.60
Expected NPV 3837.52
Std Dev 11884.88
Coeff of variation 3.10
 5.00 6.00 7.00
15,000.00 15,000.00 15,000.00
6,750.00 6,750.00 6,750.00
4,000.00 4,000.00 4,000.00
4,250.00 4,250.00 4,250.00
2,373.05 1,779.79 0.00
791.02 593.26 1,779.79
3,458.98 3,656.74 2,470.21
1,210.64 1,279.86 864.58
2,248.34 2,376.88 1,605.64
3,039.36 2,970.14 3,385.42
1,724.61 1,504.77 1,531.39

5.00 6.00 7.00

9,562.50 9,562.50 9,562.50
5,572.50 5,572.50 5,572.50
4,800.00 4,800.00 4,800.00
-810.00 -810.00 -810.00
2,373.05 1,779.79 0.00
 791.02 593.26 1,779.79
-1,601.02 -1,403.26 -2,589.79
-560.36 -491.14 -906.42
-1,040.66 -912.12 -1,683.36
-249.64 -318.86 96.42
-141.66 -161.54 43.62

5.00 6.00 7.00

20,625.00 20,625.00 20,625.00
8,437.50 8,437.50 8,437.50
3,200.00 3,200.00 3,200.00
8,987.50 8,987.50 8,987.50
2,373.05 1,779.79 0.00
791.02 593.26 1,779.79
8,196.48 8,394.24 7,207.71
2,868.77 2,937.98 2,522.70
5,327.71 5,456.25 4,685.01
6,118.73 6,049.52 6,464.80
3,471.93 3,064.87 2,924.35
 5.00 6.00 7.00
16,875.00 16,875.00 16,875.00
8,875.00 8,875.00 8,875.00
4,400.00 4,400.00 4,400.00
3,600.00 3,600.00 3,600.00
2,373.05 1,779.79 0.00
791.02 593.26 1,779.79
2,808.98 3,006.74 1,820.21
983.14 1,052.36 637.08
1,825.84 1,954.38 1,183.14
2,616.86 2,547.64 2,962.92
1,484.87 1,290.71 1,340.28
Preeti industry capital budgeting Decision

Discount R 0.05
Year 0 1 2
Combined
Cashflow ProbabilityCashflow ProbabilityCashflow Probability NPV
-900 0.2 1200 0.1 2200 0.02 2,238.32 44.77
0.2 1200 0.6 1200 0.12 1,331.29 159.76
0.2 1200 0.3 900 0.06 1,059.18 63.55
0.00
0.6 450 0.35 900 0.21 344.90 72.43
0.6 450 0.4 600 0.24 72.79 17.47
0.6 450 0.25 300 0.15 (199.32) -29.90
0.00
0.2 -600 0.1 500 0.02 (1,017.91) -20.36
0.2 -600 0.5 -100 0.1 (1,562.13) -156.21
0.2 -600 0.4 -700 0.08 (2,106.35) -168.51
Expected NPV -17.01

Abondonment option
To receive Rs200 as salvage value after 1 year if the cashflow stream is negative

Value of 2nd year inflow fordecision tree

branch with negative cashflow after 1 -266.67
tear
Discount R 0.05
Year 0 1 2
Combined
Cashflow ProbabilityCashflow ProbabilityCashflow Probability NPV
-900 0.2 1200 0.1 2200 0.02 2,238.32 44.77
0.2 1200 0.6 1200 0.12 1,331.29 159.76
0.2 1200 0.3 900 0.06 1,059.18 63.55
0.00
0.6 450 0.35 900 0.21 344.90 72.43
0.6 450 0.4 600 0.24 72.79 17.47
0.6 450 0.25 300 0.15 (199.32) -29.90
0.00
0.2 -400 1 0 0.2 (1,280.95) -256.19

Expected NPV 71.88

Value of Abondonment Option 88.89

Timing option
 With option to postpone project by 1 year and not to undertake if scenario is bad and negative
cashflow is expected

Timeline to shift by 1 year, probabilities to change

Discount R 0.05
Year 1 2 3
Combined
Cashflow ProbabilityCashflow ProbabilityCashflow Probability NPV
-900 0.4 1200 0.1 2200 0.04 2,238.32 89.53
0.4 1200 0.6 1200 0.24 1,331.29 319.51
0.4 1200 0.3 900 0.12 1,059.18 127.10
0.00
0.6 450 0.35 900 0.21 344.90 72.43
0.6 450 0.4 600 0.24 72.79 17.47
0.6 450 0.25 300 0.15 (199.32) -29.90

Expected NPV after 1 year f 596.15

NPV now 567.76
Value of Postponement or Timing Option 584.76

Growth
To invest Rs500 Option
more and expand after 1 year if good outcome cashflows after 1 year resulting in
2nd year cashinflows to go up by Rs500 in each probability branch
Probabilities and cashflows to change
NPV Without Growth

Discount R 0.05
Year 0 1 2
Combined
Cashflow ProbabilityCashflow ProbabilityCashflow Probability NPV
-900 0.5 1200 0.1 2200 0.05 2,238.32 111.92
0.5 1200 0.6 1200 0.3 1,331.29 399.39
0.5 1200 0.3 900 0.15 1,059.18 158.88

0.5 450 0.35 900 0.175 344.90 60.36

0.5 450 0.4 600 0.2 72.79 14.56
0.5 450 0.25 300 0.125 (199.32) -24.91
NPV 720.18
 NPV With Growth

Discount R 0.05
Year 0 1 2
Combined
Cashflow ProbabilityCashflow ProbabilityCashflow Probability NPV
-900 0.5 700 0.1 2700 0.05 2,215.65 110.78
0.5 700 0.6 1700 0.3 1,308.62 392.59
0.5 700 0.3 1400 0.15 1,036.51 155.48

0.5 450 0.35 900 0.175 344.90 60.36

0.5 450 0.4 600 0.2 72.79 14.56
0.5 450 0.25 300 0.125 (199.32) -24.91
NPV 708.84

Value of Growth option -11.34