Class work

Md.Mahmudul Hasan

Year Cash Flow Present Value Cash Flow (B) Present Value
(A) 10% 10%
0 -150000 -150000 -150000 --150000
1 30000 26549 60000 53097
2 35000 27410 65000 50904
3 45000 31187 45000 31187
4 65000 13660 35000 21466
5 60000 39866 30000 16282
6
∑ 𝑝𝑣 =138672 ∑ 𝑝𝑣 =172936

𝐶𝑡
Note : Present value calculation , PV=
1+𝑟𝑡

NPV FOR CASH FLOW A

𝑁𝑃𝑉 = ∑ 𝑃𝑉 − 𝐼

=138672−150000

=-11328

Rejected this project

Npv for B

𝑁𝑃𝑉 = ∑ 𝑃𝑉 − 𝐼

=172936−150000

=22936 accepted this project

Pay back period

Year Cash Balance Cash Flow(B) Balance

Flow(A)

0 -150000 -150000
-150000 - 150000
1 30000 -120000
60000 -90000
2 35000 -96041
65000 -25000
3 45000 -85000 45000 20000
4 65000 -20000
35000 -
5 60000 40000
30000 -
--

Cash Flow A 5th year pay back period .Cash Flow B is 3 years pay back period

Discountd pay back period

Year Cash Present value Balance Cash Flow(B) Present Balance

Flow(A)
10% value 10%

0 -150000 -150000 -150000 -150000 --150000 - 150000

1 30000 26549 -123451
60000 53097 -96903
2 35000 27410 -96041
65000 50904 -45999
3 45000 31187 -64854
45000 31187 -14812
4 65000 13660 -51194 35000 21466 6654
5 60000 39866 -11328
30000 16282

6 60,000 33868 --

So we will recover 4years pay back period for the initial cash outlay on
the project

Benefit Cost Ratio

i)

Year Cash Flow Present Value Cash Flow (B) Present Value
(A) 10% 10%
0 -150000 -150000 -150000 --150000
1 30000 26549 60000 53097
2 35000 27410 65000 50904
3 45000 31187 45000 31187
4 65000 13660 35000 21466
5 60000 39866 30000 16282
6
∑ 𝑝𝑣 =138672 ∑ 𝑝𝑣 =172936

BCR Calculation for Cash Flow –A

∑ 138672
BCR= 𝑃𝑉 = = 0.924< 1.0 We learn that If BCR <1.0, reject the project
150000
𝐼
BCR Calculation for Cash Flow –B

∑ 172936
BCR= 𝑃𝑉 = =1.1529 > 1.0
150000
𝐼

We learn that If BCR > 1.0, accepted the project