BUSINESS

VALUATION

Aashish Mishra
1820602
 1. Finding the cash outflow

Cost of equipment 600,000

(+) Working Capital 80,000
Net cash Outflow 680000

2. Cash Inflows

Year 1 2 3 4 5 6
CFBT 210,000 180,000 160,000 150,000 120,000 100,000
(-) Depreciation 100000 100000 100000 100000 100000 100000
PBT 110000 80000 60000 50000 20000 0
(-) TAX (50%) 55000 40000 30000 25000 10000 0
Cash flow after 55000 40000 30000 25000 10000 0
tax (A)
 (+) 100000 100000 100000 100000 100000 100000
Depreciation
(B)
CFAT (A+B) 155000 140000 130000 125000 110000 100000

Working note:

Depreciation=Initial investment /number of years

600000
¿
6

¿ 100000

3. NPV

Year CFAT Discount Rates @ NPV of CFAT in

12% Rs.
1 155000 0.892 138260
2 140000 0.797 111580
3 130000 0.711 92430
4 125000 0.635 79375
5 110000 0.567 62370
6 100000 0.506 50600
Total 534615

NPV =Σ NPV OF CFAT −Σ NPV of Net cash outflow

¿ 534615−680000

¿−145385

Decision: Since, the NPV value is negative we will not accept the investment
proposal.