Workings - Dinard:    Year    

  1  2  3  4 
  £  £  £  £ 
W1: Sales          
Sales volume = 25,000 units         
p.a. 
Unit Sales after inflation at 80  84   88.2   92.61  
5% p.a: 
Total Sales after inflation at 2,000,000  2,100,000  2,205,000  2,315,250 
5% p.a: 
 W2: Variable materials           
Sadee-Jo 
Production volume = 25,000        
units p.a. 
Unit Material cost after inflation 8  8.32  8.65  9 
at 4% p.a: 
Total Materials after inflation at 200,000  208,000  216,320  224,973 
4% p.a:       
W3: Variable labour           
steven  miguel 
Production volume = 25,000        
units p.a. 
Unit Labour cost after inflation 12  13.2  14.52  15.97 
at 5% p.a: 
Total Labour after inflation at 300,000  330,000  363,000  399,250 
5% p.a: 
W4: Variable overheads        
Kareem     
Production volume = 25,000        
units p.a. 
Unit Variable o/h’s after 12  12.48  12.98  13.5 
inflation at 4% p.a: 
Total Variable o/h’s after 300,000  312,000  324,480  337,459.2 
inflation at 4% p.a:  
W5: Fixed costs          
Amount to £800  800,000  800,000  800,000  800,000 
Depreciation = non-cash outflow so (600,000) (600,000) 600,000)  (600,000) 
ignored in NPV 
(£2,400k – 0)/4yrs = £600k p.a. dep'n         
Therefore relevant fixed costs 200,000       
are £800k - £600k =  
Total Fixed costs after inflation 200,000  210,000  220,500  231,525 
at 5% p.a: 
 

Dinard    - NPV proforma      Year     

  0  1  2  3  4 
  £000's  £000's £000's  £000's  £000's 
Operating Cash Flows:           

Sales (W1)  -  2,000  2,100  2,205  2,315 

Variable materials (W2)    (200)  (208)  (216)  (225) 
Variable labour (W3)    (300)  (330)  (363)  (399) 
Variable overheads (W4)    (300)  (312)  (324)  (337) 
Fixed overheads (W5)    (200)  (210)  (220.5)  (232) 
Net Operating CF's (Sales less   1,000  1,040  1,080  1,121 
costs) 
Capital Cash Flows:           

Cost of equipment  (2,400)  ____  ____  ____  ____ 

Net Cash Flows  (2,400)  1,000  1,040  1,080  1,121 
DF at 15%  1  0.870  0.756  0.658  0.572 
Present values:  (2,400)  870  786  711  641 
           
Net present value of   1,530  744  34  (607) 
project: £608k   
 
 

Workings - Dinard:    Year    

  1  2  3  4 
  £  £  £  £ 
W1: Sales          
Sales volume = 25,000 units         
p.a. 
Unit Sales after inflation at 80  84   88.2   92.61  
5% p.a: 
Total Sales after inflation at 2,000,000  2,100,000  2,205,000  2,315,250 
5% p.a: 
 W2: Variable materials           
Sadee-Jo 
Production volume = 25,000        
units p.a. 
Unit Material cost after inflation 8  8.32  8.65  9 
at 4% p.a: 
Total Materials after inflation at 200,000  208,000  216,320  224,973 
4% p.a:       
W3: Variable labour           
steven  miguel 
Production volume = 25,000        
units p.a. 
Unit Labour cost after inflation 12  13.2  14.52  15.97 
at 10% p.a: 
Total Labour after inflation at 300,000  330,000  363,000  399,250 
10% p.a: 
W4: Variable overheads        
Kareem     
Production volume = 25,000        
units p.a. 
Unit Variable o/h’s after 12  12.48  12.98  13.5 
inflation at 4% p.a: 
Total Variable o/h’s after 300,000  312,000  324,480  337,459.2 
inflation at 4% p.a:  
W5: Fixed costs          
Amount to £800  800,000  800,000  800,000  800,000 
Depreciation = non-cash outflow so (600,000) (600,000) 600,000)  (600,000) 
ignored in NPV 
(£2,400k – 0)/4yrs = £600k p.a. dep'n         
Therefore relevant fixed costs 200,000       
are £800k - £600k =  
Total Fixed costs after inflation 200,000  210,000  220,500  231,525 
at 5% p.a: