1.

Base-case NPV and IRR

YEAR 1 2 3 4 5
Number of students
1,500.00 1,500.00 1,500.00 1,500.00 1,500.00
Tuition fee per student
5,500.00 5,500.00 5,500.00 5,500.00 5,500.00
- - - - -
Variable cost per student
2,500.00 2,500.00 2,500.00 2,500.00 2,500.00
Contribution per student
3,000.00 3,000.00 3,000.00 3,000.00 3,000.00

Contribution value 4,500,000.0 4,500,000.0

4,500,000.00 4,500,000.00 4,500,000.00
0 0
- -
- - -
Fixed costs 1,500,000.0 1,500,000.0
1,500,000.00 1,500,000.00 1,500,000.00
0 0
- -
- - -
Depreciation 1,400,000.0 1,400,000.0
1,400,000.00 1,400,000.00 1,400,000.00
0 0

Earnings before tax 1,600,000.0 1,600,000.0

1,600,000.00 1,600,000.00 1,600,000.00
0 0
- - - - -
30% Taxation
480,000.00 480,000.00 480,000.00 480,000.00 480,000.00

Earnings after tax 1,120,000.0 1,120,000.0

1,120,000.00 1,120,000.00 1,120,000.00
0 0

Depreciation 1,400,000.0 1,400,000.0

1,400,000.00 1,400,000.00 1,400,000.00
0 0

Operating cash flows 2,520,000.0 2,520,000.0

2,520,000.00 2,520,000.00 2,520,000.00
0 0
PV factor 17%
0.8547 0.7305 0.6244 0.5337 0.4561

PV of cash flows 1,840,894.1 1,344,798.1

2,153,846.15 1,573,413.80 1,149,400.10
5 2

Total PV
8,062,352.33
Investments
7,000,000.00
NPV
 1,062,352.33

Initial -
Investment 7,000,000.00

Year 1 2,520,000.00

Year 2 2,520,000.00

Year 3 2,520,000.00

Year 4 2,520,000.00

Year 5 2,520,000.00
IRR 23.44%

1. Best-case NPV and IRR

YEAR 1 2 3 4 5
Number of students
1,725.00 1,725.00 1,725.00 1,725.00 1,725.00
Tuition fee per student
5,500.00 5,500.00 5,500.00 5,500.00 5,500.00
- - - - -
Variable cost per student
2,500.00 2,500.00 2,500.00 2,500.00 2,500.00
Contribution per student
3,000.00 3,000.00 3,000.00 3,000.00 3,000.00

Contribution value 5,175,000.0

5,175,000.00 5,175,000.00 5,175,000.00 5,175,000.00
0
-
- - - -
Fixed costs 1,500,000.0
1,500,000.00 1,500,000.00 1,500,000.00 1,500,000.00
0
-
- - - -
Depreciation 1,400,000.0
1,400,000.00 1,400,000.00 1,400,000.00 1,400,000.00
0

Earnings before tax 2,275,000.0

2,275,000.00 2,275,000.00 2,275,000.00 2,275,000.00
0
- - - - -
30% Taxation
682,500.00 682,500.00 682,500.00 682,500.00 682,500.00

Earnings after tax 1,592,500.0

1,592,500.00 1,592,500.00 1,592,500.00 1,592,500.00
0
Depreciation 1,400,000.0
1,400,000.00 1,400,000.00 1,400,000.00 1,400,000.00
0

Operating cash flows 2,992,500.0

2,992,500.00 2,992,500.00 2,992,500.00 2,992,500.00
0
PV factor 17%
0.8547 0.7305 0.6244 0.5337 0.4561

PV of cash flows 1,868,428.8

2,557,692.31 2,186,061.80 1,596,947.77 1,364,912.62
9

Total PV
9,574,043.39
Investments
7,000,000.00
NPV
2,574,043.39
Initial -
Investment 7,000,000.00

Year 1 2,992,500.00

Year 2 2,992,500.00

Year 3 2,992,500.00

Year 4 2,992,500.00

Year 5 2,992,500.00
IRR 32.14%

Worst-case NPV and IRR

YEAR 1 2 3 4 5
Number of students
1,275.00 1,275.00 1,275.00 1,275.00 1,275.00
Tuition fee per student
5,500.00 5,500.00 5,500.00 5,500.00 5,500.00
Variable cost per - - - - -
student 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00
Contribution per student
3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
Contribution value
 3,825,000.0 3,825,000.0 3,825,000.0 3,825,000.0 3,825,000.0
0 0 0 0 0
- - - - -
Fixed costs 1,500,000.0 1,500,000.0 1,500,000.0 1,500,000.0 1,500,000.0
0 0 0 0 0
- - - - -
Depreciation 1,400,000.0 1,400,000.0 1,400,000.0 1,400,000.0 1,400,000.0
0 0 0 0 0
Earnings before tax
925,000.00 925,000.00 925,000.00 925,000.00 925,000.00
- - - - -
30% Taxation
277,500.00 277,500.00 277,500.00 277,500.00 277,500.00
Earnings after tax
647,500.00 647,500.00 647,500.00 647,500.00 647,500.00

Depreciation 1,400,000.0 1,400,000.0 1,400,000.0 1,400,000.0 1,400,000.0

0 0 0 0 0

Operating cash flows 2,047,500.0 2,047,500.0 2,047,500.0 2,047,500.0 2,047,500.0

0 0 0 0 0
PV factor 17%
0.8547 0.7305 0.6244 0.5337 0.4561

PV of cash flows 1,750,000.0 1,495,726.5 1,278,398.7 1,092,648.4

933,887.58
0 0 1 7

Total PV 6,550,661.2
7

Investments 7,000,000.0
0
-
NPV
449,338.73

-
Initial 7,000,000.0
Investment 0

2,047,500.0
Year 1 0

2,047,500.0
Year 2 0
Year 3
 2,047,500.0
0

2,047,500.0
Year 4 0

2,047,500.0
Year 5 0
IRR 14.17%

2. Payback period Analysis

In the first scenario, payback period = 7000000/2520000 = 2.78 Years

In the best scenario, payback period = 7000000/2992500 = 2.34 Years

In the worst scenario, payback period = 7000000/2047500 = 3.42 Years

Appendix