Rs in million 1

Particulars Present 2020

Fixed Assets ₹ (80.00)
Net Working Capital ₹ (20.00)

Revenues ₹ 120.00

Costs (other than

depreciation and interest) ₹ 80.00
Depreciation ₹ 20.00

Total Expenses ₹ 100.00

Profit before Tax ₹ 20.00

Less: Tax @ 30% 6.00

Profit after Tax ₹ 14.00

Net Salvage Value of fixed
assets
Recovery of net working
capital
Initial outlay ₹ (100.00)
Add: Depreciation ₹ 20.00
Cash Flow from Operations ₹ 34.00
Terminal cash flow
Net Cash Flow ₹ (100.00) ₹ 34.00
Book Value of Investment ₹ 100.00 ₹ 80.00
 2 3 4 5
2021 2022 2023 2024

₹ 120.00 ₹ 120.00 ₹ 120.00 ₹ 120.00

₹ 80.00 ₹ 80.00 ₹ 80.00 ₹ 80.00

₹ 15.00 ₹ 11.25 ₹ 8.44 ₹ 6.33

₹ 95.00 ₹ 91.25 ₹ 88.44 ₹ 86.33

₹ 25.00 ₹ 28.75 ₹ 31.56 ₹ 33.67

7.50 8.63 9.47 10.10

₹ 17.50 ₹ 20.13 ₹ 22.09 ₹ 23.57

₹ 30.00

₹ 20.00

₹ 15.00 ₹ 11.25 ₹ 8.44 ₹ 6.33

₹ 32.50 ₹ 31.38 ₹ 30.53 ₹ 29.90
₹ 50.00
₹ 32.50 ₹ 31.38 ₹ 30.53 ₹ 79.90
₹ 65.00 ₹ 53.75 ₹ 45.31
 Rs in millions 1
Particulars Present 2020
Capital Equipment ₹ (100.00)

Level of working capital ₹ 20.00 ₹ 30.00

Cash Inflows
Revenues ₹ 100.00

Less:
Raw Material Cost ₹ 30.00
Loss of contribution ₹ 15.00
Operating and maintenance
cost ₹ 5.00
Bad debt loss
Labour cost ₹ 20.00
Depreciation ₹ 25.00
Total Expenses ₹ 95.00
Earnings before Taxes ₹ 5.00
Less: Taxes ₹ 2.00
Profit after Tax (PAT) ₹ 3.00
Net salvage valueof capital
equipment

Recovery of working capital

Initial Investment
Cash Flows from operations
Working Capital
Terminal Cash Flow
Total Projected Cash Flows
Cumulative Cash Flows
₹ (120.00)
₹ 28.00
₹ 20.00 ₹ 10.00
₹ (120.00) ₹ 18.00
₹ (120.00) ₹ (102.00)
 2 3 4
2021 2022 2023

₹ 40.00 ₹ 30.00 ₹ 20.00

₹ 150.00 ₹ 200.00 ₹ 150.00

₹ 45.00 ₹ 60.00 ₹ 45.00

₹ 15.00 ₹ 15.00 ₹ 15.00

₹ 5.00 ₹ 5.00 ₹ 5.00

₹ 30.00 ₹ 40.00 ₹ 30.00

₹ 18.80 ₹ 14.10 ₹ 10.50
₹ 113.80 ₹ 134.10 ₹ 105.50
₹ 36.20 ₹ 65.90 ₹ 44.50
₹ 14.48 ₹ 26.36 ₹ 17.80
₹ 21.72 ₹ 39.54 ₹ 26.70

₹ 40.52 ₹ 53.64 ₹ 37.20

₹ 10.00 ₹ (10.00) ₹ (10.00)

₹ 30.52 ₹ 63.64 ₹ 47.20

₹ (71.48) ₹ (7.84) ₹ 39.36
 5
2024

Depreciation
₹ - ₹ 100.00
₹ 25.00
₹ 75.00
₹ 18.75
₹ 56.25
₹ 100.00 ₹ 14.06
₹ 42.19
₹ 10.55
₹ 30.00 ₹ 31.64
₹ 15.00 ₹ 7.91

₹ 5.00
₹ 5.00
₹ 20.00
₹ 7.90
₹ 82.90
₹ 17.10
₹ 6.84
₹ 10.26

₹ 20.00

₹ 15.00

₹ 23.16
₹ -
₹ 35.00
₹ 58.16
₹ 97.52
 Rs in millions 1
Particulars Present 2020
Capital Equipment ₹ (120.00)

Level of working capital ₹ 20.00 ₹ 30.00

Cash Inflows
Revenues ₹ 80.00

Less:
Raw Material Cost ₹ 24.00
Selling Expenses ₹ 8.00
Operating and maintenance cost ₹ 10.00
Contribution margin ₹ 10.00
Bad Debt
Overheads(excluding depreciation,
maintenance and interest) ₹ 8.00
Manufacturing costs ₹ 8.00
Depreciation ₹ 30.00
Total Expenses ₹ 98.00
Earnings before Taxes ₹ (18.00)
Less: Taxes ₹ (5.40)
Profit after Tax (PAT) ₹ (12.60)
Net salvage valueof capital equipment
Recovery of working capital
Initial Investment ₹ (120.00)
Cash Flows from operations ₹ 17.40
Working Capital ₹ 20.00 ₹ 10.00
Terminal Cash Flow
Total Projected Cash Flows ₹ (120.00) ₹ 7.40
Cumulative Cash Flows ₹ (120.00) ₹ (112.60)

NPV (cost of capital @15%) 1.20

 2 3 4 5 6
2021 2022 2023 2024 2025

₹ 40.00 ₹ 50.00 ₹ 40.00 ₹ 30.00 ₹ 20.00

₹ 120.00 ₹ 160.00 ₹ 200.00 ₹ 160.00 ₹ 120.00

₹ 36.00 ₹ 48.00 ₹ 60.00 ₹ 48.00 ₹ 36.00

₹ 12.00 ₹ 16.00 ₹ 20.00 ₹ 16.00 ₹ 12.00
₹ 10.00 ₹ 10.00 ₹ 10.00 ₹ 10.00 ₹ 10.00
₹ 10.00 ₹ 10.00 ₹ 10.00 ₹ 10.00 ₹ 10.00

₹ 12.00 ₹ 16.00 ₹ 20.00 ₹ 16.00 ₹ 12.00

₹ 12.00 ₹ 16.00 ₹ 20.00 ₹ 16.00 ₹ 12.00
₹ 22.50 ₹ 16.88 ₹ 12.66 ₹ 9.49 ₹ 7.12
₹ 114.50 ₹ 132.88 ₹ 152.66 ₹ 125.49 ₹ 99.12
₹ 5.50 ₹ 27.13 ₹ 47.34 ₹ 34.51 ₹ 20.88
₹ 1.65 ₹ 8.14 ₹ 14.20 ₹ 10.35 ₹ 6.26
₹ 3.85 ₹ 18.99 ₹ 33.14 ₹ 24.16 ₹ 14.62

₹ 26.35 ₹ 35.86 ₹ 45.80 ₹ 33.65 ₹ 21.74

₹ 10.00 ₹ 10.00 ₹ (10.00) ₹ (10.00) ₹ (10.00)

₹ 16.35 ₹ 25.86 ₹ 55.80 ₹ 43.65 ₹ 31.74

₹ (96.25) ₹ (70.39) ₹ (14.59) ₹ 29.06 ₹ 60.79
 7
2026

Depreciation
120
30
90
22.5
₹ 80.00 67.5
16.875
50.625
₹ 24.00 ₹ 12.66
₹ 8.00 ₹ 37.97
₹ 10.00 ₹ 9.49
₹ 10.00 ₹ 28.48
₹ 4.00

₹ 8.00 ₹ 7.12
₹ 8.00 ₹ 21.36
₹ 5.34 ₹ 5.34
₹ 77.34
₹ 2.66
₹ 0.80
₹ 1.86
₹ 25.00
₹ 10.00

₹ 11.20
0
₹ 35.00
₹ 46.20
₹ 107.00
Required rate of return ₹ 0.20 1 2
Particulars Present 2020 2021
Initial Investment
Real Estate investment ₹ 5,000,000.00
Showroom and furnishing ₹ 2,500,000.00
Working Capital Invesmtent ₹ 2,300,000.00
Total Investment ₹ (9,800,000.00)

Cash Inflows
Total Expected units sales 2000.00 2300.00
Expected selling price ₹ 500,000.00 ₹ 550,000.00
Projected Sales ₹ 1,000,000,000.00 ₹ 1,265,000,000.00
Market Share 0.05 0.09
Market Share in Value ₹ 50,000,000.00 ₹ 113,850,000.00
Dealership Margin 0.03 0.03
Dealership Margin in Value ₹ 1,500,000.00 ₹ 3,415,500.00
Less:
Sales and Admin Expenses ₹ 200,000.00 ₹ 300,000.00
Marketing Expenses ₹ 500,000.00 ₹ 1,138,500.00
Depreciation ₹ 500,000.00 ₹ 500,000.00
Total Expenses ₹ 1,200,000.00 ₹ 1,938,500.00
Earnings before Taxes ₹ 300,000.00 ₹ 1,477,000.00
Less: Taxes ₹ 111,000.00 ₹ 546,490.00
Profit after Tax (PAT) ₹ 189,000.00 ₹ 930,510.00
Add: Depreciation ₹ 500,000.00 ₹ 500,000.00
Cash Flows from operations ₹ 689,000.00 ₹ 1,430,510.00
Terminal Value
Total Projected Cash Flows ₹ (9,800,000.00) ₹ 689,000.00 ₹ 1,430,510.00
Cumulative Cash Flows ₹ (9,800,000.00) ₹ (9,111,000.00) ₹ (7,680,490.00)

NPV ₹ 17,558,925.72
IRR 51.23%
PI 2.792
PBP (years) 3.97
 3 4 5
2022 2023 2024

2645.00 3041.75 3498.01

₹ 605,000.00 ₹ 665,500.00 ₹ 732,050.00
₹ 1,600,225,000.00 ₹ 2,024,284,625.00 ₹ 2,560,720,050.63
0.14 0.19 0.22
₹ 224,031,500.00 ₹ 384,614,078.75 ₹ 563,358,411.14
0.03 0.03 0.03
₹ 6,720,945.00 ₹ 11,538,422.36 ₹ 16,900,752.33

₹ 400,000.00 ₹ 500,000.00 ₹ 600,000.00

₹ 1,120,157.50 ₹ 1,923,070.39 ₹ 2,816,792.06
₹ 500,000.00 ₹ 500,000.00 ₹ 500,000.00
₹ 2,020,157.50 ₹ 2,923,070.39 ₹ 3,916,792.06
₹ 4,700,787.50 ₹ 8,615,351.97 ₹ 12,983,960.28
₹ 1,739,291.38 ₹ 3,187,680.23 ₹ 4,804,065.30
₹ 2,961,496.13 ₹ 5,427,671.74 ₹ 8,179,894.98
₹ 500,000.00 ₹ 500,000.00 ₹ 500,000.00
₹ 3,461,496.13 ₹ 5,927,671.74 ₹ 8,679,894.98
₹ 43,399,474.88
₹ 3,461,496.13 ₹ 5,927,671.74 ₹ 52,079,369.85
₹ (4,218,993.88) ₹ 1,708,677.87 ₹ 53,788,047.72
Required rate of return 15% 1
Particulars Present 2020
Demand ₹ 60,000.00
Price per unit ₹ 350.00

Total Revenue ₹ 21,000,000.00

Less: Expenses
Variable cost per unit ₹ 200.00
Variable cost ₹ 12,000,000.00
Other fixed expenses ₹ 1,000,000.00
Annual lease expense ₹ 1,000,000.00
Depreciation 2000000.00
Total Expenses ₹ 16,000,000.00

Earnings before tax ₹ 5,000,000.00

Less: Tax ₹ 1,000,000.00
PAT ₹ 4,000,000.00

Net cash flow from operations ₹ 6,000,000.00

Remittance to parent ₹ 6,000,000.00
Less: tax on remitted funds ₹ 600,000.00
Remittance after tax ₹ 5,400,000.00
Net Salvage value
Exchange rate ₹ 0.50
Cash flow to parent ₹ 2,700,000.00

Initial Investment ₹ 10,000,000.00

NPV
 2 3 4
2021 2022 2023
₹ 60,000.00 ₹ 100,000.00 ₹ 100,000.00
₹ 350.00 ₹ 360.00 ₹ 380.00

₹ 21,000,000.00 ₹ 36,000,000.00 ₹ 38,000,000.00

₹ 200.00 ₹ 250.00 ₹ 260.00

₹ 12,000,000.00 ₹ 25,000,000.00
₹ 1,000,000.00 ₹ 1,000,000.00
₹ 1,000,000.00 ₹ 1,000,000.00
2000000.00 2000000.00
₹ 16,000,000.00 ₹ 29,000,000.00
₹ 26,000,000.00
₹ 1,000,000.00
₹ 1,000,000.00
2000000.00
₹ 30,000,000.00

₹ 5,000,000.00 ₹ 7,000,000.00 ₹ 8,000,000.00

₹ 1,000,000.00 ₹ 1,400,000.00 ₹ 1,600,000.00
₹ 4,000,000.00 ₹ 5,600,000.00 ₹ 6,400,000.00

₹ 6,000,000.00 ₹ 7,600,000.00 ₹ 8,400,000.00

₹ 6,000,000.00 ₹ 7,600,000.00 ₹ 8,400,000.00
₹ 600,000.00 ₹ 760,000.00 ₹ 840,000.00
₹ 5,400,000.00 ₹ 6,840,000.00 ₹ 7,560,000.00
₹ 12,000,000.00
₹ 0.50 ₹ 0.50 ₹ 0.50
₹ 2,700,000.00 ₹ 3,420,000.00 ₹ 9,780,000.00

₹22,229,866.25
Exchange rate 0.5

Particulars present 1 2
Cash ₹ (20.00)

Demand in units 60000 60000

price per racket ₹350.00 ₹350.00
Projected sales ₹21,000,000.00 ₹21,000,000.00

Less expenses:
Variable cost in unit 200 200
Variable cost ₹ 12,000,000.00 ₹ 12,000,000.00
Annual lease expenses ₹ 1,000,000.00 ₹ 1,000,000.00
Other annual ovh ₹ 1,000,000.00 ₹ 1,000,000.00
Depreciation ₹ 2,000,000.00 ₹ 2,000,000.00
Total Expenses ₹ 16,000,000.00 ₹ 16,000,000.00
Earnings before tax ₹5,000,000.00 ₹5,000,000.00
Less: tax ₹1,000,000.00 ₹1,000,000.00
Earnings after tax ₹4,000,000.00 ₹4,000,000.00
Add depreciation ₹ 2,000,000.00 ₹ 2,000,000.00
Net cash flow from ops ₹6,000,000.00 ₹6,000,000.00
With holding tax 10% ₹600,000.00 ₹600,000.00
Remitted after tax ₹5,400,000.00 ₹5,400,000.00
Net salvage value
₹5,400,000.00 ₹5,400,000.00
Exchange rate 0.5 0.5
total projected cashflows ₹ (10,000,000.00) ₹2,700,000.00 ₹2,700,000.00
Cumulative cash flow ₹ (10,000,000.00) ₹ (7,300,000.00) -₹4,600,000.00
NPV
IRR
PI
We are still making a positive NPV. Hence they can go ahead. PBP
 Rs in million

3 4

100000 100000
₹360.00 ₹380.00
₹36,000,000.00 ₹38,000,000.00

250 260
₹ 25,000,000.00 ₹ 26,000,000.00
₹ 1,000,000.00 ₹ 1,000,000.00
₹ 1,000,000.00 ₹ 1,000,000.00
₹ 2,000,000.00 ₹ 2,000,000.00
₹ 29,000,000.00 ₹ 30,000,000.00
₹7,000,000.00 ₹8,000,000.00
₹1,400,000.00 ₹1,600,000.00
₹5,600,000.00 ₹6,400,000.00
₹ 2,000,000.00 ₹ 2,000,000.00
₹7,600,000.00 ₹8,400,000.00
₹760,000.00 ₹840,000.00
₹6,840,000.00 ₹7,560,000.00
₹ 12,000,000.00
₹6,840,000.00 ₹19,560,000.00
0.5 0.5
₹3,420,000.00 ₹9,780,000.00
-₹1,180,000.00 ₹8,600,000.00
₹2,229,866.25
23.395%
1.22299
-₹3.88
1 Option 1
Year Present 1 2
Units ₹ 800,000.00 ₹ 1,400,000.00
SP per unit ₹ 30.00 ₹ 22.00

Revenue ₹ 24,000,000.00 ₹ 30,800,000.00

Less: expenses

Variable cost per unit 14 14

Variable cost per unit ₹ 11,200,000.00 ₹ 19,600,000.00

Fixed production cost ₹ 2,400,000.00 ₹ 2,400,000.00
Marketing cost ₹ 2,000,000.00 ₹ 2,000,000.00
Depreciation ₹ 1,600,000.00 ₹ 1,600,000.00
Rent lost ₹ 100,000.00 ₹ 100,000.00
Total Expenses ₹ 17,300,000.00 ₹ 25,700,000.00
Earnings before tax ₹ 6,700,000.00 ₹ 5,100,000.00
Less: tax 0 0
Net Income ₹ 6,700,000.00 ₹ 5,100,000.00
Add: depreciation ₹ 1,600,000.00 ₹ 1,600,000.00
Add: salvage value
Net Cash Flows ₹ 8,300,000.00 ₹ 6,700,000.00
Total Projected cash
flows ₹ (12,000,000.00) ₹ 8,300,000.00 ₹ 6,700,000.00
Cumulative cash flows ₹ (12,000,000.00) ₹ (3,700,000.00) ₹ 3,000,000.00

NPV ₹10,630,517.38

Option 2
Particulars Present Year-1 Year-2
New sales(10% higher) 880000 1540000
Royalty (5 per unit) 4400000 7700000
NPV ₹ 24,017,075.34

Option 3
Selling rights
Present Year-2
Installments ₹ 12,000,000.00 ₹ 12,000,000.00
PV@10% 1 0.826
PV ₹ 12,000,000.00 ₹ 9,912,000.00
 NPV ₹ 21,912,000.00

2
Before ariving at a decision, Newton Ltd. should consider the credit worthiness & market
agreement and pay dues on timely basis.

3 Option 2 is more attractive as the NPV is higher.

 3 4 5
₹ 1,800,000.00 ₹ 1,200,000.00 ₹ 500,000.00
₹ 22.00 ₹ 22.00 ₹ 20.00

₹ 39,600,000.00 ₹ 26,400,000.00 ₹ 10,000,000.00

14 14 14

₹ 25,200,000.00 ₹ 16,800,000.00 ₹ 7,000,000.00

₹ 2,400,000.00 ₹ 2,400,000.00 ₹ 2,400,000.00
₹ 2,000,000.00 ₹ 2,000,000.00 ₹ 2,000,000.00
₹ 1,600,000.00 ₹ 1,600,000.00 ₹ 1,600,000.00
₹ 100,000.00 ₹ 100,000.00 ₹ 100,000.00
₹ 31,300,000.00 ₹ 22,900,000.00 ₹ 13,100,000.00
₹ 8,300,000.00 ₹ 3,500,000.00 ₹ (3,100,000.00)
0 0 0
₹ 8,300,000.00 ₹ 3,500,000.00 ₹ (3,100,000.00)
₹ 1,600,000.00 ₹ 1,600,000.00 ₹ 1,600,000.00
₹ 1,000,000.00
₹ 9,900,000.00 ₹ 5,100,000.00 ₹ (500,000.00)

₹ 9,900,000.00 ₹ 5,100,000.00 ₹ (500,000.00)

₹ 12,900,000.00 ₹ 18,000,000.00 ₹ 17,500,000.00

Year-3 Year-4 Year-5

1980000 1320000 550000
9900000 6600000 2750000
redit worthiness & market reputation of Faraday electricals plc. It should also consider the ability and willin
der the ability and willingness of Faraday to comply with the