Q) CALVIN CO

USING FOR YEAR 3

YEAR PARTICULARS CF DF@10% DCF
1 PURCHASE -800000
1 MAINTIANCE
1 FUEL COST
2 MAINTAINCE
2 FUEL COST
3 MAINTAINCE
3 FUEL COST
3 RESALE

THE EAC IS LOWEST FOR THE 4TH YEAR THE BEAST SHALL BE REPLACED EVERY FOUR YEARS

Q)CAPITAL RATIONING

W X Y Z
INVESTMENT -10000 -20000 -30000 -40000
PV OF INFLOW 11240 20991 32230 43801
NPV 1240 991 2230 3801
RANK AS PER NPV 1 4 2 3
RANKING
W -0.1240 1
X -0.0496 4
Y -0.0743 3
Z -0.0950 2

RANKING AS PER PROFIBILITY INDEX

PROJECT INVT NPV
W 10000 1240
Z 40000 3801
Y 10000
TOTAL 60000 5041

Q)TRAIL AND ERROR METHOD

P Q R
INVESTMENTS -40 -50 -30
PV 56.5 67 48.8
NPV 16.5 17 18.8

TRAIL AND ERROR

 COMBINATION INVT NPV
P+Q 90 16.5
Q+R -80 35.8
P+R -70 35.3

THE HIGHEST NPV OF COMBINATION IS Q AND R

Q)2

A)PROJECT IS DIVISIBLE
A B C D
INVT -1000 -1200 -800 -700
PV 1500 1900 1100 1150
NPV 500 700 300 450

PROFITBLITY INDEX METHOD

A B C D
-0.50 -0.58 -0.38 -0.64
RANKING 3 2 4 1

SELECTING OF PROJECT
PROJECT INVT NPV
D -700 450
B -1200 700
A -600 -300
TOTAL -2500 1450

TRAIL AND ERROR

COMBINATION INVESTMENT NPV

A+B -2200 1200
B+C -2000 1000
A+C+D -2500 1250

HIHEST IS COMBINATION OF A+C+D

q) amal
fund avivable 90 lakhs
A B C npv method
inv 60 50 85 ranking
pv of in 82 70 110 a b
npv 22 30 35 3 2

profibility index
ranking
a 0.366666666666667 2
b 0.6 1
c 0.411764705882353 3

select pi
projrct inv npv
b 50 30
a 40 14.67
total 44.666666667

BUYING OPT AND LESING OPT

Q)

DF @ AFTER TAX
DF AFTER TAX 7
7%

DEPERCTAION ON SAVINGS TAX

YEAR COST DEP TAX SAVIMNGS ON DEP
1 63000 15750 4725
2 47250 11812.5 3543.75
3 35437.5 8859.375 2657.813
4 26578.125 26578.13 7973.438

BUYING OPTION
YEAR CAPIOTAL; COST TAX SAV ON DEP
0 63000
1
2 4725
3 3543.75
4 2657.813
5 7973.438

LESSE OPTON
YEAR RENTAL I TAX EXP ON R TCF
0 0
1 20000 -20000
2 20000 -6000 -14000
3 20000 -6000 -14000
4 20000 -6000 -14000
5 -6000 6000
 ₹ -48,750.52

WORKING FINANCE
PARTICULARS
MONTH OCT NOV DEC JAN FEB

ESTIMATED PAYMENTS

RUNNING EXP 1600 1600 1600 1600 1600

DRWAINGS 1000 1000 1000 1000 1000
PAAYMEMT TO SUPP 5000 2000 4000 4000 7000

TOTAL CASH PAYMENT 7600 4600 6600 6600 9600

ESTIMATED RECIPTS

SALES 3000 6000 6000

TOTAL RECIPTS 0 0 3000 6000 6000
SURPLUA/DEFCIT -7600 -4600 -3600 -600 -3600
OP BAL 7000 -600 -5200 -8800 -9400

CL BAL -600 -5200 -8800 -9400 -13000

TOTAL INV=95
TOTAL INVT=2500

select npv
project inv npv
c c 85 35
1 b 5 3
total 38
tcf
-63000

4725
3543.75
2657.8125
7973.4375
-4723639.966298040%

DF@ 7%$ DCF

0.934579439252336 -18692
0.873438728273212 -12228
0.816297876890852 -11428
0.762895212047525 -10681
0.712986179483668 4278
 -48751

OCT NOC DEC JAN FEB

MARCH COST OF S 2000 4000 4000 7000 0

SEP

1600
1000 8000 PUR OF NCA
7000

9600

10500
10500
900
-13000

-12100
MARCH
0
FIVE STAGES OF RENT A CAR

STAGE 5

COST: RENT A CAR

SWIFT:900000

YEAR ANUUAL COST MAINTANCE COST NON FINANCE

1 250000 9000
2 220000 34000
3 220000 20000
RESALE VALUE 500000
DF @ 10%

SOULTION
W1)CALCULATE OF TAX SAVINGS ON DEPEECRITION
YEAR OP BAL DEP @ 15% TAX SAVINGS ON DEP
1 900000 135000 40500
2 765000 114750 34425
3 650250 150250 45075
CL BAL; 500000
SALE RE VA 500000 BALANCING ALOOWANCE IN THE FINAL YEAR DEPERCITIUON

YEAR CAPITAL P SALES VALUERENT INCOME TAX EXPENSE TAX SAVINGS

0 900000
1 250000
2 220000 -75000 40500
3 500000 220000 -66000 34425
4 -66000 45075

Q)

DEPERCATION SAV ON TAX WORKING

YEAR COST DEP 25% TAX SAVINGS ON DEPERCATION
1 20000 5000 1500
2 15000 3750 1125
3 11250 2812.5 843.75
4 8437.5 2109.38 632.8125
5 6328.13 2328.13 698.4375
RESALE VVALUE 4000
CLOSING BALANCE 4000.00
 CAPITAL TAX EXP
PURCHAS SALES TAX SAV ON
YEAR E VALUE ON DEP INCOME INCOME TCF
0 20000 20000
1 4800 4800
2 1500 -1440 4800 4860
3 1125 -1440 4800 4485
4 843.75 -1440 4800 4203.75
5 4000 632.8125 -1440 4800 7992.8125
6 698.4375 -1440 -741.5625
AR DEPERCITIUON

MINTIANCE COST TAX SAVINGS ON MAINTAINCE TCF DF@ 10% DCF

900000 1.000 900000
-9000 241000 0.909 219090.9
-34000 2700 154200 0.826 127438
-20000 10200 678625 0.751 509861
6000 -14925 0.683 -10194

NPV 1746196
DP @ 12% DCF
1.000 -20000
0.893 4285.714
0.797 3874.362
0.712 3192.334
0.636 2671.559
0.567 4531.925
0.507 -375.9722

NPV -1820.077
RENT A CAR BUSINNESS

DEPERCATION ON SAVINGS
YEAR COST DEP TAX SAVINGS ON DEP
1 3200000 200000 60000
2 3000000 200000 60000
3 2800000 200000 60000

RESALE VALUE 2600000

CLOSING BALANCE 2600000

YEAR CAPITAL COST SALES VALUE RENTAL INCOME

0 3200000
1 400000
2 385000
3 2600000 384000
4

NPV IS NEGATIVE
SO THE RENTING THE CAR IS NOT WORTHWHILE
AS NPV IS NEGATIVE DECRESE IN SHAREHOLDERS WEALTY MAXIMAIXATIOON

b)find buying opton and lesing option and compare which is better
buying option

YEAR CAPITAL COST SALES VALUE TAX SAVINGS ON DEP

0 3200000
1
2 60000
3 2600000 60000
4 60000

lesing option
YEAR
0 RENTAL payments TAX sav on ri
1
2 -400000
3 -385000 120000
4 -384000 115500
115200
 the pv of les opt is better than buying opt

PRESENT VALUE OF LEASING

Q)137 ILLU 1
LEASING OPT
AFTER TAX
11%
YEAR COST TAX ON LE TCF DF @ 11% DCF
0 -3500 -3500 1 -3500
1 -3500 -3500 0.900901 -3153.15315315315
2 -3500 1050 -2450 0.811622 -1988.47496144793
3 -3500 1050 -2450 0.731191 -1791.41888418733
4 -3500 1050 -2450 0.658731 -1613.89088665525
5 1050 1050 0.593451 623.123894461487
6 1050 1050 0.534641 561.372877893231
PV IF LESE ₹ -10,862.44 -10862.4411130889
Q)ILLU 2
BUYING OPTION
AFTER TAX
12.187
12%

TAX SAVINGS ON DEPERCATION

YEAR CoST DEP TAX SAV
1 2000000 500000 150000
2 1500000 375000 112500
3 1125000 281250 84375
4 843750 210937.5 63281.25
5 632812.5 632812.5 189843.75
sales revalue
BUYING OPT
CAPITAL TAX SAV MAINTANCE TAX SAV
YEAR COST ON DEP CIST ON MAIN TCF DF
0 -2000000 -2000000 1
1 -65000 -65000 0.892857
2 150000 -65000 19500 104500 0.797194
3 112500 -65000 19500 67000 0.71178
4 84375 -65000 19500 38875 0.635518
5 63281.25 -65000 19500 17781.25 0.567427
6 189843.8 19500 209343.75 0.506631
PV OF BUYING OPT -1786184.29462794

q)156 project e pg 159

TAX SAV ON DEP

YEAR COST DEP TAX SAV ON DEP

1 5000000 1250000 350000
2 3750000 937500 262500
3 2812500 703125 196875
4 2109375 1709375 478625

SALES REV 400000

CL BAL 400000

CAPITAL TAX SAV TAX ON

YEAR COST DEP CF CF TCF DF @ 13%
0 -5000000 0 -5000000 1
1 18292200 18292200 0.884956
2 350000 21342285.25 -5121816 16570469.25 0.783147
3 262500 17617006.26 -5975840 11903666.3925 0.69305
4 400000 196875 19574734.4 -4932762 15238847.6481875 0.613319
5 478625 -5480926 -5002300.6324725 0.54276
NPV

YEAR SALES TS TVC TFC SALES

1 12000 5670000 3307200 9315000
2 13000 6807938 4089904 10444444 5670000
3 10000 5788125 3513497.2 8315384 6807938
4 10000 6928386 4039926.272 8606423 5788125
6928386
VIRIBLE
YEAR SELLING P COST FIXED COST
1 450 260 750
2 475 280 750
3 500 295 750
4 570 320 750
TOTAL 1995 1155 3000
 TAX EXPENSE TAX SAVINGS ON DEP MINTINACE COST TAX ON SAVIN MAINTITCF
3200000
-20000 380000
-120000 60000 -40000 6000 291000
-115500 60000 -60000 12000 2880500
-115200 60000 18000 -37200

e which is better

TAX SAVINGS ON DEPMINTINACE COST TAX ON SAVIN MAINTINTCF DF @ 10% DCF

3200000 1 -3200000
-20000 -20000 0.909091 18181.818
-40000 6000 26000 0.826446 -21487.6
-60000 12000 2612000 0.751315 -1962434
18000 78000 0.683013 -53275.05
pv of buying option -5219015

tcf df@ 10% dcf

0.909090909 total
-400000 0.826446281
-265000 0.751314801
-268500 0.683013455
115200 1
DCF
-2000000
-58035.71
83306.76
47689.28
24705.77
10089.56
106060.1
-1786184
DCF
-5000000
16187788
12977108
8249838
9346271
-2715048
39045956

VARIBLE
COST FIXED COST

3307200 9315000
4089904 10444443.75
3513497 8315384.063
4039926 8606422.505
DF @ 10% DCF
1 -3200000
0.909091 345454.5
0.826446 240495.9
0.751315 2164162
0.683013 -25408.1
NPV -475295