Depreciation Expense

Straight Line Method

$
2016 ($5000000 - $0)/40 Years 125000 Less:
2017 ($5000000 - $0)/40 Years 125000
2018 ($5000000 - $0)/40 Years 125000 Less:
2019 ($5000000 - $0)/40 Years 125000
2020 ($5000000 - $0)/40 Years 125000
2021 ($5000000 - $0)/40 Years 125000
2022 ($5000000 - $0)/40 Years 125000 Less:

Add:
 Annuity/ Cash Flow After Tax/ Returns
2016 2017 2018 2019 2020
Sales Revenue 2200000 2400000 2800000 3200000 3600000
Cost of Goods Sold 880000 960000 1120000 1280000 1440000
Gross Profit 1320000 1440000 1680000 1920000 2160000
Operating Expenses:
Others Expenses 20000 40000 80000 20000 60000
Depreciation Expenses 125000 125000 125000 125000 125000
Profit Before Tax 1175000 1275000 1475000 1775000 1975000
Tax @ 35% 411250 446250 516250 621250 691250
Profit After Tax 763750 828750 958750 1153750 1283750
Depreciation Expense 125000 125000 125000 125000 125000
Cash Flow After Tax 888750 953750 1083750 1278750 1408750

Project Life Span 7 Years

Years CFAT DF(10%) Present Value
1 888750 0.909 807954.55
2 953750 0.826 788223.14
3 1083750 0.751 814237.42
4 1278750 0.683 873403.46
5 1408750 0.621 874722.91
6 1584250 0.564 894267.82
7 1733750 0.513 889687.89
Present Value of Cash Inflows 5942497.18
Present Value of Cash Outflow $5000000 x 1 5000000.00
Net Present Value 942497.18

Simple PBP(4 to 5 Years) 4 Years & 7 Months

4205000 (($5000000-$4205000)/$1408750)*12

Discounted PBP(5 to 6 Years) 5 Years & 11 Months

4158541.47 (($5000000-$4158541.47)/$894267.82)*12

Profitability Index Present Value of Cash Inflows 5942497.18

Present Value of Cash Outflows 5000000.00

Internal Rate of Return

Rate of return at which NPV is zero
Zero NPV means PV of Cashinflows = PV of cashoutflows
Internal Rate of Return > Cost of Capital = Accepted
Internal Rate of Return < Cost of Capital = Rejected
a% + ((A/A-B) x (b-a))%
a = Interest rate at which NPV is highest
b = Interest rate at which NPV is lowest
 A = Highest NPV
B = Lowest NPV
10% NPV = $8000 and 20% NPV = -$13500
10%+((8000/8000+13500)*(20-10))%
13.7%
At 13.7% return our project NPV will be zero
For acceptable project our cost of capital should be lower than 13.7%
 2021 2022
4000000 4400000
1600000 1760000
2400000 2640000

30000 40000
125000 125000
2245000 2475000
785750 866250
1459250 1608750
125000 125000
1584250 1733750

Accepted

1.1884994 Accepted
 2021 2022 2023 2024 2025
Sales Revenue
Less: COGS
Gross Profit 1500000 2250000 3000000 3750000 4500000
Less: Operating Expenses:
Others 20000 40000 80000 20000 60000
Depreciation 900000 810000 729000 656100 590490
EBIT 580000 1400000 2191000 3073900 3849510
Less: Interest 0 0 0 0 0
EBT 580000 1400000 2191000 3073900 3849510
Tax @ 25% 145000 350000 547750 768475 962377.5
EAT 435000 1050000 1643250 2305425 2887132.5
Add: Depreciation 900000 810000 729000 656100 590490
CFAT 1335000 1860000 2372250 2961525 3477622.5

Years CFAT DF (15%)

2021 1335000 0.870
2022 1860000 0.756
2023 2372250 0.658
2024 2961525 0.572
2025 3477622.5 0.497
2026 4055360.3 0.432
2027 4604574.2 0.376
PV of Cash Inflows
PV of Cash Outflows
Net present Value

Present Value of Cash Inflow

Profitability Index
Present Value of Cash Outflow

Simple PBP(4 & 5 years) 4 Years &

8528775

Discounted PBP(5 & 6 years) 5 Years &

7549344.2
 2026 2027 Reducing Balance Method @ 10%
$
2021 9000000 x 10% 900000
5250000 6000000 2022 ($9000000-$900000) x 10% 810000
2023 ($9000000-$1710000) x 10% 729000
20000 20000 2024 ($9000000-$2439000) x 10% 656100
531441 478296.9 2025 ($9000000-$3095100) x 10% 590490
4698559 5501703.1 2026 ($9000000-$3685590) x 10% 531441
0 0 2027 ($9000000- $4217031) x 10% 478296.9
4698559 5501703.1
1174639.75 1375425.8
3523919.25 4126277.3
531441 478296.9
4055360.25 4604574.2

PV
1160869.5652174
1406427.221172
1559792.8823868
1693261.5306549
1728993.0011499
1753244.1474378
1731030.0042527
11033618.352272
9000000
2033618.3522715 Accepted

11033618.35
1.23 Accepted
9000000.00

2 Months
(($9000000-$8528775)/$3477622.5)*12

10 Months
(($9000000-$7549344.2)/$1753244.147)*12)