QUIZ 02/02/21

COST OF PLANT 150000

FOUNDATION COST 10000
INSTALLATION COST 20000
LIFE 5
COST OF CAPITAL 15%
TAX RATE 40%
DETAILS OF REVENUE
YEAR EBT
1 100000
2 150000
3 7000
4 70000
5 60000

REQ 1: PAYBACK PERIOD

YEAR EBT TAX TAX AMOUNT PROFIT AFTER TAX

1 100000 0.4 40000 60000
2 150000 0.4 60000 90000
3 7000 0.4 2800 4200
4 70000 0.4 28000 42000
5 60000 0.4 24000 36000

PAYBACK PERIOD IS 1 TO 2 YEARS

REQ 2: NET PRESENT VALUE

YEAR EBT TAX TAX AMOUNT PROFIT AFTER TAX

1 100000 0.4 40000 60000
2 150000 0.4 60000 90000
3 7000 0.4 2800 4200
4 70000 0.4 28000 42000
5 60000 0.4 24000 36000
TOTAL PRESENT VALUE OF CASH INFLOW
TOTAL PRESENT VALUE OF CASH OUTFLOW
NET PRESENT VALUE

REQ 3: PROFITABILITY INDEX

YEAR EBT TAX TAX AMOUNT PROFIT AFTER TAX

1 100000 0.4 40000 60000
2 150000 0.4 60000 90000
3 7000 0.4 2800 4200
 4 70000 0.4 28000 42000
5 60000 0.4 24000 36000
TOTAL PRESENT VALUE OF CASH INFLOW
TOTAL PRESENT VALUE OF CASH OUTFLOW
NET PRESENT VALUE
PI = NET PRESENT VALUE / PRESENT VALUE OF CASH OUTFLOW

REQ 4: IRR
15% 20%
Year cash inflow (1+r)t (1+r)t
0 -150000 1.000 -150,000 1
1 90000 1.150 78,261 1.2
2 120000 1.323 90,737 1.44
3 34200 1.521 22,487 1.728
4 72000 1.749 41,166 2.0736
5 66000 2.011 32,814 2.48832
18,998
IRR 24 % to 25 %

REQ 5: PROFITABILITY INDEX

YEAR EBT TAX TAX AMOUNT PROFIT AFTER TAX

1 100000 0.4 40000 60000
2 150000 0.4 60000 90000
3 7000 0.4 2800 4200
4 70000 0.4 28000 42000
5 60000 0.4 24000 36000
TOTAL PRESENT VALUE OF CASH INFLOW
TOTAL PRESENT VALUE OF CASH OUTFLOW
BC ratio = present value of cash inflow / present value of cash outflow

REQ 6: AVERAGE RATE OF RETURN

YEAR EBT
1 100000
2 150000
3 7000
4 70000
5 60000
TOTAL PROFIT 387000
NO. OF YEARS 5
AVERAGE PROFIT 77400
AVERAGE RATE OF RETURN 52%
DEPRECIATION CASH INFLOW ACCUMULATED CASH INFLOW
30000 90000 90000
30000 120000 210000
30000 34200 244200
30000 72000 316200
30000 66000 382200

DEPRECIATION CASH INFLOW (1+r)t PRESENT VALUE OF CASH INFLOW

30000 90000 1.15 78,261
30000 120000 1.32 90,737
30000 34200 1.52 22,487
30000 72000 1.75 41,166
30000 66000 2.01 32,814
265,465
150000
115,465

DEPRECIATION CASH INFLOW (1+r)t PRESENT VALUE OF CASH INFLOW

30000 90000 1.15 78,261
30000 120000 1.32 90,737
30000 34200 1.52 22,487
 30000 72000 1.75 41,166
30000 66000 2.01 32,814
265,465
150000
115,465
77%

20% 24% 25%

(1+r)t (1+r)t
-150,000 1 -150,000 1
75,000 1.240 72,581 1.250
83,333 1.538 78,044 1.563
19,792 1.907 17,937 1.953
34,722 2.364 30,454 2.441
26,524 2.932 22,513 3.052
8,333 624

DEPRECIATION CASH INFLOW (1+r)t PRESENT VALUE OF CASH INFLOW

30000 90000 1.15 78,261
30000 120000 1.32 90,737
30000 34200 1.52 22,487
30000 72000 1.75 41,166
30000 66000 2.01 32,814
265,465
150000
1.77
-150,000
72,000
76,800
17,510
29,491
21,627
-1,200
COST OF PLANT 150000
FOUNDATION COST 10000
INSTALLATION COST 20000
LIFE 5
COST OF CAPITAL 15%
TAX RATE 40%
sales 1500 units
DETAILS OF REVENUE
YEAR EBT
1 100000
2 150000
3 7000
4 70000
5 60000

CALCULATE NET PRESENT VALUE

computation of cash infow

YEAR 0 1 2 3 4 5
cost of plant -150000
no of units sold 1500 6 6 6 6
selling price per unit 2 2 2 2 2
sales revenue 3000 12 12 12 12
less cost
fixed cost 2 2 2 2 2
variable cost 6 6 6 6 6
depreciation 1 1 1 1 1
total cost 9 9 9 9 9
Profit before tax 2991 3 3 3 3
tax 1196.4 1.2 1.2 1.2 1.2
Profit after tax 1794.6 1.8 1.8 1.8 1.8
add depreciation 1 1 1 1 1
cash inflow -5 1795.6 2.8 2.8 2.8 2.8
discount rate 1 1.100 1.210 1.331 1.464 1.611
Present value of cash flow -5 1,632.36 2.31 2.10 1.91 1.74
net presaent value 1635.43