NOD Co a franchise of Dr.

Reddyy pharmacy, sells 250 strips/day of low budget drugs at an average contribution of Rs
Sales volume and average price are expected to grow by 5% every year for both the drugs
To operate a franchise , it needs to have a 1250 sqft space for retail shop with a lease rental of Rs.175 / sqft / month (re
A one time renovation of the premises worth Rs.30,00,000 will need to be incurred at the start. Required personnel cos
Wage inflation in the economy is 8%. Other operational expenses are expected to be 30% of the contribution, generate
Tax rate in the economy is 35%. Tax losses cannot be carried forward
The initial investment (deposit + renovation) can be funded by 60% bank loan (@13% interest rate). The remaining sho
Other investment opportunity with NOD Co. is expected to provide a return of 25%
Evaluate the business opportunity with a project life of 5 years
After 5 years the franchise will be handed over to Dr. Reddyy and the deposit will be refunded to the NOD Co.(Ignore d
 rage contribution of Rs.40/ strip and 150 strips/day of high budget drugs at an average contribution of Rs.70/ strip

Rs.175 / sqft / month (rental contract for 5 years, deposit of Rs.15,00,000 at the start)
Required personnel costs are Rs 125,000/month
contribution, generated for the period

ate). The remaining should be funded using equity. The debt is to be repaid at the end of 5 years in lump sum

o the NOD Co.(Ignore depreciation) If NOD Co. invests in the project, what is the expected IRR?
 Chart Title
1200

1000

800

600

400

200

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
 Year-0 Year-1 Year-2 Year-3 Year-4 Year-5
Sales Volume (Strips/Day)
Low Budge 250 3% qty sold 250 257.50 265.23 273.18 281.38
High Budg 150 3% 150 154.50 159.14 163.91 168.83

commission (Rs./Strip)
Low Budge 40 5% sp 40 42.00 44.10 46.31 48.62
High Budg 70 5% 70 73.50 77.18 81.03 85.09

Annual Sales 365 7,482,500 8,092,324 8,751,848 9,465,124 10,236,531

Rent E 12 1250 175 2,625,000 2,625,000 2,625,000 2,625,000 2,625,000

Salarie 12 125000 8% 1,500,000 1,620,000 1,749,600 1,889,568 2,040,733
Other Expenses 30% 2,244,750 2,427,697 2,625,554 2,839,537 3,070,959
Interest Expense 13% 128,700 128,700 128,700 128,700 128,700
PBT 984,050 1,290,927 1,622,994 1,982,319 2,371,139
Tax Expense 35% 344,418 451,824 568,048 693,812 829,898
PAT 639,633 839,102 1,054,946 1,288,507 1,541,240

Cash Flow Calculations

Initial Investment (4,500,000) <==

Debt Raised 990,000
Debt Repaid (990,000)
Deposit Refund 1,500,000
PAT 639,633 839,102 1,054,946 1,288,507 1,541,240
Total Cash Flow (3,510,000) 639,633 839,102 1,054,946 1,288,507 2,051,240

IRR 16.29% good investment as IRR > Cost of Capital

opportunity 15.0%

operational sensitivity
% growth in sales volume
16.29% 3% 4.00% 5% 6% 7%
300 -9% -6% -4% -1% 2%
310 -5% -2% 1% 3% 5%
320 -1% 2% 4% 7% 9%
workdays
330 3% 6% 8% 11% 13%
/yr
340 7% 10% 12% 14% 16%
350 11% 13% 16% 18% 20%
365 16% 19% 21% 23% 25%

0 1 2 3
-100 -10 -10 -10
irr Err:523 irr > coc
coc 20%

financing sensitivity
 interest rate %
16.29% 11% 12.00% 13% 14% 15% <== LOW IMPACT ON IRR
0% 14% 14% 14% 14% 14%
15% 16% 16% 16% 15% 15%
30% 18% 18% 17% 17% 17%
% debt 45% 22% 21% 20% 20% 19%
60% 28% 27% 26% 25% 24%
75% 45% 43% 40% 38% 35%
90% 115% 109% 102% 96% 90%

DEBT = RISK
RISK ==> MORE RETURNS
LEVERAGE
 LL UL RANDOM
Volume Gr 2 8 3%
OPEX % 25 30 30% <==
Debt % 20 70 22%
Deposit 1,500,000
Rennovation 3,000,000 WHAT IS THE PROB THAT PROJECT BEATS THE COST OF CAPIT
Initial Invest 4,500,000

Debt 990,000 22% 16.3% MEAN 16%

Equity 3,510,000 1 16.3% SD 0%
2 16.3% MAX 16%
Debt is to be repaid at end of 5 years 3 16.3% MIN 16%
4 16.3%
5 16.3% 10% 0
6 16.3% 15% 0
7 16.3% 20% 1000
8 16.3% 25% 0
9 16.3% 30% 0
10 16.3% 35% 0
11 16.3% 40% 0
12 16.3% 45% 0
13 16.3% 50% 0
14 16.3% 55% 0
15 16.3% 60% 0
16 16.3% 65% 0
17 16.3% 70% 0
18 16.3% 75% 0
19 16.3% 80% 0
20 16.3%
21 16.3%
22 16.3%
23 16.3%
24 16.3%
25 16.3%
26 16.3%
27 16.3%
28 16.3%
29 16.3%
30 16.3%
31 16.3%
32 16.3%
33 16.3%
34 16.3%
35 16.3%
36 16.3%
37 16.3%
38 16.3%
39 16.3%
40 16.3%
41 16.3%
42 16.3%
43 16.3%
 44 16.3%
= LOW IMPACT ON IRR 45 16.3%
46 16.3%
47 16.3%
48 16.3%
49 16.3%
50 16.3%
51 16.3%
52 16.3%
53 16.3%
54 16.3%
55 16.3%
56 16.3%
57 16.3%
58 16.3%
59 16.3%
60 16.3%
61 16.3%
62 16.3%
63 16.3%
64 16.3%
65 16.3%
66 16.3%
67 16.3%
68 16.3%
69 16.3%
70 16.3%
71 16.3%
72 16.3%
73 16.3%
74 16.3%
75 16.3%
76 16.3%
77 16.3%
78 16.3%
79 16.3%
80 16.3%
81 16.3%
82 16.3%
83 16.3%
84 16.3%
85 16.3%
86 16.3%
87 16.3%
88 16.3%
89 16.3%
90 16.3%
91 16.3%
92 16.3%
93 16.3%
94 16.3%
95 16.3%
96 16.3%
 97 16.3%
98 16.3%
99 16.3%
100 16.3%
101 16.3%
102 16.3%
103 16.3%
104 16.3%
105 16.3%
106 16.3%
107 16.3%
108 16.3%
109 16.3%
110 16.3%
111 16.3%
112 16.3%
113 16.3%
114 16.3%
115 16.3%
116 16.3%
117 16.3%
118 16.3%
119 16.3%
120 16.3%
121 16.3%
122 16.3%
123 16.3%
124 16.3%
125 16.3%
126 16.3%
127 16.3%
128 16.3%
129 16.3%
130 16.3%
131 16.3%
132 16.3%
133 16.3%
134 16.3%
135 16.3%
136 16.3%
137 16.3%
138 16.3%
139 16.3%
140 16.3%
141 16.3%
142 16.3%
143 16.3%
144 16.3%
145 16.3%
146 16.3%
147 16.3%
148 16.3%
149 16.3%
150 16.3%
151 16.3%
152 16.3%
153 16.3%
154 16.3%
155 16.3%
156 16.3%
157 16.3%
158 16.3%
159 16.3%
160 16.3%
161 16.3%
162 16.3%
163 16.3%
164 16.3%
165 16.3%
166 16.3%
167 16.3%
168 16.3%
169 16.3%
170 16.3%
171 16.3%
172 16.3%
173 16.3%
174 16.3%
175 16.3%
176 16.3%
177 16.3%
178 16.3%
179 16.3%
180 16.3%
181 16.3%
182 16.3%
183 16.3%
184 16.3%
185 16.3%
186 16.3%
187 16.3%
188 16.3%
189 16.3%
190 16.3%
191 16.3%
192 16.3%
193 16.3%
194 16.3%
195 16.3%
196 16.3%
197 16.3%
198 16.3%
199 16.3%
200 16.3%
201 16.3%
202 16.3%
203 16.3%
204 16.3%
205 16.3%
206 16.3%
207 16.3%
208 16.3%
209 16.3%
210 16.3%
211 16.3%
212 16.3%
213 16.3%
214 16.3%
215 16.3%
216 16.3%
217 16.3%
218 16.3%
219 16.3%
220 16.3%
221 16.3%
222 16.3%
223 16.3%
224 16.3%
225 16.3%
226 16.3%
227 16.3%
228 16.3%
229 16.3%
230 16.3%
231 16.3%
232 16.3%
233 16.3%
234 16.3%
235 16.3%
236 16.3%
237 16.3%
238 16.3%
239 16.3%
240 16.3%
241 16.3%
242 16.3%
243 16.3%
244 16.3%
245 16.3%
246 16.3%
247 16.3%
248 16.3%
249 16.3%
250 16.3%
251 16.3%
252 16.3%
253 16.3%
254 16.3%
255 16.3%
256 16.3%
257 16.3%
258 16.3%
259 16.3%
260 16.3%
261 16.3%
262 16.3%
263 16.3%
264 16.3%
265 16.3%
266 16.3%
267 16.3%
268 16.3%
269 16.3%
270 16.3%
271 16.3%
272 16.3%
273 16.3%
274 16.3%
275 16.3%
276 16.3%
277 16.3%
278 16.3%
279 16.3%
280 16.3%
281 16.3%
282 16.3%
283 16.3%
284 16.3%
285 16.3%
286 16.3%
287 16.3%
288 16.3%
289 16.3%
290 16.3%
291 16.3%
292 16.3%
293 16.3%
294 16.3%
295 16.3%
296 16.3%
297 16.3%
298 16.3%
299 16.3%
300 16.3%
301 16.3%
302 16.3%
303 16.3%
304 16.3%
305 16.3%
306 16.3%
307 16.3%
308 16.3%
309 16.3%
310 16.3%
311 16.3%
312 16.3%
313 16.3%
314 16.3%
315 16.3%
316 16.3%
317 16.3%
318 16.3%
319 16.3%
320 16.3%
321 16.3%
322 16.3%
323 16.3%
324 16.3%
325 16.3%
326 16.3%
327 16.3%
328 16.3%
329 16.3%
330 16.3%
331 16.3%
332 16.3%
333 16.3%
334 16.3%
335 16.3%
336 16.3%
337 16.3%
338 16.3%
339 16.3%
340 16.3%
341 16.3%
342 16.3%
343 16.3%
344 16.3%
345 16.3%
346 16.3%
347 16.3%
348 16.3%
349 16.3%
350 16.3%
351 16.3%
352 16.3%
353 16.3%
354 16.3%
355 16.3%
356 16.3%
357 16.3%
358 16.3%
359 16.3%
360 16.3%
361 16.3%
362 16.3%
363 16.3%
364 16.3%
365 16.3%
366 16.3%
367 16.3%
368 16.3%
369 16.3%
370 16.3%
371 16.3%
372 16.3%
373 16.3%
374 16.3%
375 16.3%
376 16.3%
377 16.3%
378 16.3%
379 16.3%
380 16.3%
381 16.3%
382 16.3%
383 16.3%
384 16.3%
385 16.3%
386 16.3%
387 16.3%
388 16.3%
389 16.3%
390 16.3%
391 16.3%
392 16.3%
393 16.3%
394 16.3%
395 16.3%
396 16.3%
397 16.3%
398 16.3%
399 16.3%
400 16.3%
401 16.3%
402 16.3%
403 16.3%
404 16.3%
405 16.3%
406 16.3%
407 16.3%
408 16.3%
409 16.3%
410 16.3%
411 16.3%
412 16.3%
413 16.3%
414 16.3%
415 16.3%
416 16.3%
417 16.3%
418 16.3%
419 16.3%
420 16.3%
421 16.3%
422 16.3%
423 16.3%
424 16.3%
425 16.3%
426 16.3%
427 16.3%
428 16.3%
429 16.3%
430 16.3%
431 16.3%
432 16.3%
433 16.3%
434 16.3%
435 16.3%
436 16.3%
437 16.3%
438 16.3%
439 16.3%
440 16.3%
441 16.3%
442 16.3%
443 16.3%
444 16.3%
445 16.3%
446 16.3%
447 16.3%
448 16.3%
449 16.3%
450 16.3%
451 16.3%
452 16.3%
453 16.3%
454 16.3%
455 16.3%
456 16.3%
457 16.3%
458 16.3%
459 16.3%
460 16.3%
461 16.3%
462 16.3%
463 16.3%
464 16.3%
465 16.3%
466 16.3%
467 16.3%
468 16.3%
469 16.3%
470 16.3%
471 16.3%
472 16.3%
473 16.3%
474 16.3%
475 16.3%
476 16.3%
477 16.3%
478 16.3%
479 16.3%
480 16.3%
481 16.3%
482 16.3%
483 16.3%
484 16.3%
485 16.3%
486 16.3%
487 16.3%
488 16.3%
489 16.3%
490 16.3%
491 16.3%
492 16.3%
493 16.3%
494 16.3%
495 16.3%
496 16.3%
497 16.3%
498 16.3%
499 16.3%
500 16.3%
501 16.3%
502 16.3%
503 16.3%
504 16.3%
505 16.3%
506 16.3%
507 16.3%
508 16.3%
509 16.3%
510 16.3%
511 16.3%
512 16.3%
513 16.3%
514 16.3%
515 16.3%
516 16.3%
517 16.3%
518 16.3%
519 16.3%
520 16.3%
521 16.3%
522 16.3%
523 16.3%
524 16.3%
525 16.3%
526 16.3%
527 16.3%
528 16.3%
529 16.3%
530 16.3%
531 16.3%
532 16.3%
533 16.3%
534 16.3%
535 16.3%
536 16.3%
537 16.3%
538 16.3%
539 16.3%
540 16.3%
541 16.3%
542 16.3%
543 16.3%
544 16.3%
545 16.3%
546 16.3%
547 16.3%
548 16.3%
549 16.3%
550 16.3%
551 16.3%
552 16.3%
553 16.3%
554 16.3%
555 16.3%
556 16.3%
557 16.3%
558 16.3%
559 16.3%
560 16.3%
561 16.3%
562 16.3%
563 16.3%
564 16.3%
565 16.3%
566 16.3%
567 16.3%
568 16.3%
569 16.3%
570 16.3%
571 16.3%
572 16.3%
573 16.3%
574 16.3%
575 16.3%
576 16.3%
577 16.3%
578 16.3%
579 16.3%
580 16.3%
581 16.3%
582 16.3%
583 16.3%
584 16.3%
585 16.3%
586 16.3%
587 16.3%
588 16.3%
589 16.3%
590 16.3%
591 16.3%
592 16.3%
593 16.3%
594 16.3%
595 16.3%
596 16.3%
597 16.3%
598 16.3%
599 16.3%
600 16.3%
601 16.3%
602 16.3%
603 16.3%
604 16.3%
605 16.3%
606 16.3%
607 16.3%
608 16.3%
609 16.3%
610 16.3%
611 16.3%
612 16.3%
613 16.3%
614 16.3%
615 16.3%
616 16.3%
617 16.3%
618 16.3%
619 16.3%
620 16.3%
621 16.3%
622 16.3%
623 16.3%
624 16.3%
625 16.3%
626 16.3%
627 16.3%
628 16.3%
629 16.3%
630 16.3%
631 16.3%
632 16.3%
633 16.3%
634 16.3%
635 16.3%
636 16.3%
637 16.3%
638 16.3%
639 16.3%
640 16.3%
641 16.3%
642 16.3%
643 16.3%
644 16.3%
645 16.3%
646 16.3%
647 16.3%
648 16.3%
649 16.3%
650 16.3%
651 16.3%
652 16.3%
653 16.3%
654 16.3%
655 16.3%
656 16.3%
657 16.3%
658 16.3%
659 16.3%
660 16.3%
661 16.3%
662 16.3%
663 16.3%
664 16.3%
665 16.3%
666 16.3%
667 16.3%
668 16.3%
669 16.3%
670 16.3%
671 16.3%
672 16.3%
673 16.3%
674 16.3%
675 16.3%
676 16.3%
677 16.3%
678 16.3%
679 16.3%
680 16.3%
681 16.3%
682 16.3%
683 16.3%
684 16.3%
685 16.3%
686 16.3%
687 16.3%
688 16.3%
689 16.3%
690 16.3%
691 16.3%
692 16.3%
693 16.3%
694 16.3%
695 16.3%
696 16.3%
697 16.3%
698 16.3%
699 16.3%
700 16.3%
701 16.3%
702 16.3%
703 16.3%
704 16.3%
705 16.3%
706 16.3%
707 16.3%
708 16.3%
709 16.3%
710 16.3%
711 16.3%
712 16.3%
713 16.3%
714 16.3%
715 16.3%
716 16.3%
717 16.3%
718 16.3%
719 16.3%
720 16.3%
721 16.3%
722 16.3%
723 16.3%
724 16.3%
725 16.3%
726 16.3%
727 16.3%
728 16.3%
729 16.3%
730 16.3%
731 16.3%
732 16.3%
733 16.3%
734 16.3%
735 16.3%
736 16.3%
737 16.3%
738 16.3%
739 16.3%
740 16.3%
741 16.3%
742 16.3%
743 16.3%
744 16.3%
745 16.3%
746 16.3%
747 16.3%
748 16.3%
749 16.3%
750 16.3%
751 16.3%
752 16.3%
753 16.3%
754 16.3%
755 16.3%
756 16.3%
757 16.3%
758 16.3%
759 16.3%
760 16.3%
761 16.3%
762 16.3%
763 16.3%
764 16.3%
765 16.3%
766 16.3%
767 16.3%
768 16.3%
769 16.3%
770 16.3%
771 16.3%
772 16.3%
773 16.3%
774 16.3%
775 16.3%
776 16.3%
777 16.3%
778 16.3%
779 16.3%
780 16.3%
781 16.3%
782 16.3%
783 16.3%
784 16.3%
785 16.3%
786 16.3%
787 16.3%
788 16.3%
789 16.3%
790 16.3%
791 16.3%
792 16.3%
793 16.3%
794 16.3%
795 16.3%
796 16.3%
797 16.3%
798 16.3%
799 16.3%
800 16.3%
801 16.3%
802 16.3%
803 16.3%
804 16.3%
805 16.3%
806 16.3%
807 16.3%
808 16.3%
809 16.3%
810 16.3%
811 16.3%
812 16.3%
813 16.3%
814 16.3%
815 16.3%
816 16.3%
817 16.3%
818 16.3%
819 16.3%
820 16.3%
821 16.3%
822 16.3%
823 16.3%
824 16.3%
825 16.3%
826 16.3%
827 16.3%
828 16.3%
829 16.3%
830 16.3%
831 16.3%
832 16.3%
833 16.3%
834 16.3%
835 16.3%
836 16.3%
837 16.3%
838 16.3%
839 16.3%
840 16.3%
841 16.3%
842 16.3%
843 16.3%
844 16.3%
845 16.3%
846 16.3%
847 16.3%
848 16.3%
849 16.3%
850 16.3%
851 16.3%
852 16.3%
853 16.3%
854 16.3%
855 16.3%
856 16.3%
857 16.3%
858 16.3%
859 16.3%
860 16.3%
861 16.3%
862 16.3%
863 16.3%
864 16.3%
865 16.3%
866 16.3%
867 16.3%
868 16.3%
869 16.3%
870 16.3%
871 16.3%
872 16.3%
873 16.3%
874 16.3%
875 16.3%
876 16.3%
877 16.3%
878 16.3%
879 16.3%
880 16.3%
881 16.3%
882 16.3%
883 16.3%
884 16.3%
885 16.3%
886 16.3%
887 16.3%
888 16.3%
889 16.3%
890 16.3%
891 16.3%
892 16.3%
893 16.3%
894 16.3%
895 16.3%
896 16.3%
897 16.3%
898 16.3%
899 16.3%
900 16.3%
901 16.3%
902 16.3%
903 16.3%
904 16.3%
905 16.3%
906 16.3%
907 16.3%
908 16.3%
909 16.3%
910 16.3%
911 16.3%
912 16.3%
913 16.3%
914 16.3%
915 16.3%
916 16.3%
917 16.3%
918 16.3%
919 16.3%
920 16.3%
921 16.3%
922 16.3%
923 16.3%
924 16.3%
925 16.3%
926 16.3%
927 16.3%
928 16.3%
929 16.3%
930 16.3%
931 16.3%
932 16.3%
933 16.3%
934 16.3%
935 16.3%
936 16.3%
937 16.3%
938 16.3%
939 16.3%
940 16.3%
941 16.3%
942 16.3%
943 16.3%
944 16.3%
945 16.3%
946 16.3%
947 16.3%
948 16.3%
949 16.3%
950 16.3%
951 16.3%
952 16.3%
953 16.3%
954 16.3%
955 16.3%
956 16.3%
957 16.3%
958 16.3%
959 16.3%
960 16.3%
961 16.3%
962 16.3%
963 16.3%
964 16.3%
965 16.3%
966 16.3%
967 16.3%
968 16.3%
969 16.3%
970 16.3%
971 16.3%
972 16.3%
973 16.3%
974 16.3%
975 16.3%
976 16.3%
977 16.3%
978 16.3%
979 16.3%
980 16.3%
981 16.3%
982 16.3%
983 16.3%
984 16.3%
985 16.3%
986 16.3%
987 16.3%
988 16.3%
989 16.3%
990 16.3%
991 16.3%
992 16.3%
993 16.3%
994 16.3%
995 16.3%
996 16.3%
997 16.3%
998 16.3%
999 16.3%
TS THE COST OF CAPITAL OF 15%

Z VALUE #DIV/0!

REJ PROB #DIV/0!

ACCEPT P #DIV/0!