Investment outlay 1 2 3 4 5

Plant and Machinery 150

Net Working Capital 50

Revenues 250 250 250 250 250

Operation costs (fixed +variable) 100 100 100 100 100
Earning Before Interest ,Depreciation
and Tax (EBDIT) 150 150 150 150 150
Depreciation (WDV) 37.5 28.125 21.09375 15.82031 11.86523
EBIT 112.5 121.875 128.9063 134.1797 138.1348
Tax @30% 33.75 36.5625 38.67188 40.25391 41.44043
EBIAT or NOPAT 78.75 85.3125 90.23438 93.92578 96.69434
Operating cash flows( EBIAT+Dep) 116.25 113.4375 111.3281 109.7461 108.5596
Additional capex 0 0 0 0 0
Net Working capital
Terminal CF -Salvage Value
Free cash flow all investors/project -200 116.25 113.4375 111.3281 109.7461 108.5596

Internal Rate of return (where npv=0) 55%

 6 7
Depreciation Rate 25% Tax rate 30%
Year BV (beg) Dep (end)
1 150 37.5
250 250 2 112.5 28.125
100 100 3 84.375 21.09375

150 150 4 63.28125 15.82031

8.898926 6.674194 5 47.46094 11.86523
141.1011 143.3258 6 35.5957 8.898926
42.33032 42.99774 7 26.69678 6.674194
98.77075 100.3281
107.6697 107.0023
0 0
-50
48
107.6697 205.0023 Discount factor
Investment outlay 1.00 2.00 3.00 4.00 5.00
Plant and Machinery 120.00
Net Working Capital 20.00 30.00 40.00 50.00 40.00 30.00

Revenues 80.00 120.00 160.00 200.00 160.00

Raw material cost (30% of reveneues) 24.00 36.00 48.00 60.00 48.00
Variable manufaturing cost (10 % of rev) 8.00 12.00 16.00 20.00 16.00
Fixed annaul maintenance cost 10.00 10.00 10.00 10.00 10.00
Variable selling expense 8.00 12.00 16.00 20.00 16.00
Overhead cost (only incremental) 4.00 6.00 8.00 10.00 8.00
Earning Before Interest ,Depreciation and
Tax (EBDIT) 26.00 44.00 62.00 80.00 62.00
Oppurtunity cost 10.00 10.00 10.00 10.00 10.00
Depreciation (WDV) 30.00 22.50 16.88 12.66 9.49
EBIT -14.00 11.50 35.13 57.34 42.51
Bad Debt loss
Tax @30% -4.20 3.45 10.54 17.20 12.75
EBIAT or NOPAT -9.80 8.05 24.59 40.14 29.76
Operating cash flows( EBIAT+Dep) 20.20 30.55 41.46 52.80 39.25
Additional capex 0.00 0.00 0.00 0.00 0.00
Delta Net Working capital 10.00 10.00 10.00 -10.00 -10.00
Terminal CF -Salvage Value
Free cash flow all investors/project 10.20 20.55 31.46 62.80 49.25
Discount factor 0.87 0.76 0.66 0.57 0.50
Present value -140.00 8.87 15.54 20.69 35.90 24.48
NPV 141.70
IRR 0.0028
 6.00 7.00
Depreciation Rate 25% Tax rate 30%
20.00 Year BV (beg) Dep (end)
1 120 30
120.00 80.00 2 90 22.5
36.00 24.00 3 67.5 16.875
12.00 8.00 4 50.625 12.65625
10.00 10.00 5 37.96875 9.492188
12.00 8.00 6 28.47656 7.119141
6.00 4.00 7 21.35742 5.339355

44.00 26.00
10.00 10.00
7.12 5.34
26.88 10.66 Cost of capital = 15%
4.00
8.06 2.00
18.82 4.66
25.94 10.00
0.00 0.00
-10.00 -20.00
25.00
35.94 55.00
0.43 0.38
15.54 20.68
All value in lakhs Year 1.000 2.000 3.000 4.000

New Investment capital

New machine cost 30
Salvage value of old machine -9
Incvremental working capital 5
So Total investment 26

Revenues 6.500 6.500 6.500 6.500

Additional operating cost 0.000 0.000 0.000 0.000

EBDIT 6.500 6.500 6.500 6.500

Depreciation 5.500 4.125 3.094 2.320
EBIT 1.000 2.375 3.406 4.180
Tax 0.300 0.713 1.022 1.254
EBIAT 0.700 1.663 2.384 2.926
OCF (add dep) 6.200 5.788 5.478 5.246
Del NWC
Terminal salavage value
FCFF 6.200 5.788 5.478 5.246
Discount factor 0.877 0.769 0.675 0.592
PV 5.439 4.453 3.698 3.106
value 28.678
NPV 2.678
 Depreciation
5.000 old machine 25%

Time BV Dep Diff depreciation

1 8 2 5.5
2 6 1.5 4.125
3 4.5 1.125 3.09375
4 3.375 0.84375 2.3203125
5 2.53125 0.632813 1.740234375

6.500
0.000
Dep new
6.500 machine 25%
1.740 Time BV Dep
4.760 1 30 7.5
1.428 2 22.5 5.625
3.332 3 16.875 4.21875
5.072 4 12.65625 3.164063
-5.000 5 9.492188 2.373047
13.000
23.072 Tax 30% Cost of capital
0.519
11.983

terminal salvage value

New machine 15
Old machine -2
Total 13
14%