CAPITAL BUDGETING WORKSHEET 5

Equity Analysis of a Project In GVT JV

INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE

Initial Investme(in Lakhs) ₹ 1,000.00 Revenues in year (in Lakhs) ₹ 1,750.00 *3.5 MSM* 50 Rs.Approach(1:Direct;2:CAPM)=

Opportunity cost (if any) $0 Var. Expenses as % of Rev= 70% 1. Discount rate =

Lifetime of the investment 10 Fixed expenses in year 1= 30% 2a. Beta

Salvage Value at end of project ( ₹ 100.00 Tax rate on net income= 26% b. Riskless rate=

Deprec. method(1:St.line;2:DDB) 2 c. Market risk premium =

Tax Credit (if any d. Debt Ratio =

Other invest.(non-depreciable) 0 e. Cost of Borrowing =

Discount rate used=

WORKING CAPITAL

Initial Investment in Work. Cap ₹ 437.50

Working Capital as % of Rev 25%

Salvageable fraction at end 100%

GROWTH RATES

1 2 3 4 5 6 7

Revenues Do not enter 10.00% 10.00% 10.00% 10.00% 0.00% 0.00%

Fixed Expenses Do not enter 10.00% 10.00% 10.00% 10.00% 0.00% 0.00%
 CAPITAL BUDGETING WORKSHEET 6

Default: The fixed expense growth rate is set equal to the growth rate in revenues by default.
YEAR
0 1 2 3 4 5 6 7
INITIAL INVESTMENT
Investment ₹ 1,000.00
- Tax Credit $0
Net Investment ₹ 1,000.00
+ Working Cap ₹ 437.50
+ Opp. Cost ₹ -
+ Other invest. ₹ -
Initial Investme ₹ 1,437.50

SALVAGE VALUE
Equipment ₹ - ₹ - ₹ - ₹ - ₹ - ₹ - ₹ -
Working Capital ₹ - ₹ - ₹ - ₹ - ₹ - ₹ - ₹ -

OPERATING CASHFLOWS (In Lakhs)

Lifetime Index 1 1 1 1 1 1 1
Revenues ₹ 1,750.00 ₹ 1,925.00 ₹ 2,117.50 ₹ 2,329.25 ₹ 2,562.18 ₹ 2,562.18 ₹ 2,562.18
-Var. Expenses ₹ 1,225.00 ₹ 1,347.50 ₹ 1,482.25 ₹ 1,630.48 ₹ 1,793.52 ₹ 1,793.52 ₹ 1,793.52
- Fixed Expenses ₹ 0.30 ₹ 0.33 ₹ 0.36 ₹ 0.40 ₹ 0.44 ₹ 0.44 ₹ 0.44
EBITDA ₹ 524.70 ₹ 577.17 ₹ 634.89 ₹ 698.38 ₹ 768.21 ₹ 768.21 ₹ 768.21
- Depreciation ₹ 200.00 ₹ 160.00 ₹ 128.00 ₹ 102.40 ₹ 81.92 ₹ 65.54 ₹ 52.43
EBIT ₹ 324.70 ₹ 417.17 ₹ 506.89 ₹ 595.98 ₹ 686.29 ₹ 702.68 ₹ 715.78
-Tax ₹ 84.42 ₹ 108.46 ₹ 131.79 ₹ 154.95 ₹ 178.44 ₹ 182.70 ₹ 186.10
EBIT(1-t) ₹ 240.28 ₹ 308.71 ₹ 375.10 ₹ 441.02 ₹ 507.86 ₹ 519.98 ₹ 529.68
+ Depreciation ₹ 200.00 ₹ 160.00 ₹ 128.00 ₹ 102.40 ₹ 81.92 ₹ 65.54 ₹ 52.43
- ∂ Work. Cap ₹ - ₹ 43.75 ₹ 48.13 ₹ 52.94 ₹ 58.23 ₹ - ₹ -
NOPAT ₹ -1,437.50 ₹ 440.28 ₹ 424.96 ₹ 454.97 ₹ 490.48 ₹ 531.55 ₹ 585.52 ₹ 582.11
Discount Factor 1 ₹ 1.08 ₹ 1.16 ₹ 1.25 ₹ 1.35 ₹ 1.45 ₹ 1.57 ₹ 1.69
Discounted CF ₹ -1,437.50 ₹ 408.49 ₹ 365.81 ₹ 363.37 ₹ 363.45 ₹ 365.43 ₹ 373.48 ₹ 344.49

Investment Measures
NPV = ₹ 2,031.17
IRR = 31.31%
 CAPITAL BUDGETING WORKSHEET 7

ROC = 102.00%

BOOK VALUE & DEPRECIATION

Book Value (beginning) ₹ 1,000.00 ₹ 800.00 ₹ 640.00 ₹ 512.00 ₹ 409.60 ₹ 327.68 ₹ 262.14
Depreciation ₹ 200.00 ₹ 160.00 ₹ 128.00 ₹ 102.40 ₹ 81.92 ₹ 65.54 ₹ 52.43
 CAPITAL BUDGETING WORKSHEET 8

BV(ending) ₹ 1,000.00 ₹ 800.00 ₹ 640.00 ₹ 512.00 ₹ 409.60 ₹ 327.68 ₹ 262.14 ₹ 209.72

 CAPITAL BUDGETING WORKSHEET 9

COUNT RATE

roach(1:Direct;2:CAPM)= 2

iscount rate = 10%

0.8

6.00%

Market risk premium = 5.50%

70.00%

Cost of Borrowing = 9.00%

count rate used= 7.78%

8 9 10

0.00% 0.00% 0.00%

0.00% 0.00% 0.00%

 CAPITAL BUDGETING WORKSHEET 10

8 9 10

₹ - ₹ - ₹ 100.00
₹ - ₹ - ₹ 640.54

1 1 1
₹ 2,562.18 ₹ 2,562.18 ₹ 2,562.18
₹ 1,793.52 ₹ 1,793.52 ₹ 1,793.52
₹ 0.44 ₹ 0.44 ₹ 0.44
₹ 768.21 ₹ 768.21 ₹ 768.21
₹ 41.94 ₹ 33.55 ₹ 26.84
₹ 726.27 ₹ 734.66 ₹ 741.37
₹ 188.83 ₹ 191.01 ₹ 192.76
₹ 537.44 ₹ 543.65 ₹ 548.61
₹ 41.94 ₹ 33.55 ₹ 26.84
₹ - ₹ - ₹ -
₹ 579.38 ₹ 577.20 ₹ 575.46
₹ 1.82 ₹ 1.96 ₹ 2.12
₹ 318.12 ₹ 294.04 ₹ 271.99
 CAPITAL BUDGETING WORKSHEET 11

₹ 209.72 ₹ 167.77 ₹ 134.22

₹ 41.94 ₹ 33.55 ₹ 26.84
 CAPITAL BUDGETING WORKSHEET 12

₹ 167.77 ₹ 134.22 ₹ 107.37