ANSWER

Year
(1)
Cash inflow/ (outflow)
(2)
DCF @ 10%
(3)
Present Value of Future Cash
Flows
(4 = 2 * 3)
0 (30,000) 1.000 (30,000)
1 14000 0.91 12740
2 8200 0.83 6806
3 12000 0.75 9000
4 15000 0.68 10200
5 22000 0.62 13640
NPV = 22386
IRR = 33.6 (CALCULATED ON
EXCEL) 22386
1.

YEAR CASH DCF @10% PRESENT

INFLOW/OUTFLOW VALUE OF
CASH
INFLOWS
0 (30000) 1 (30000)
1 14000 0.91 12740
2 8200 0.83 6806
3 12000 0.75 9000
4 15000 0.68 10200
5 22000 0.62 13640
22386

NPV = 22386
IRR = 34% (CALCULATED ON EXCEL)

YEAR CASH INFLOW PV 34% PRESENT

VALUE
0 (30000) (30000)
1 14000 0.75 10500
2 8200 0.55 4510
3 12000 0.42 5040
4 15000 0.31 4650
5 22000 0.23 5060
(240)

NPV = (240)
IRR of the project is 34% than the hurdle rate of 15%, the project can be
accepted.
2.

Cash Conversion Cycle = DIO + DSO – DPO

=12.76+8.18-6.36
= 14.58(15DAYS)

AVERAGE INVENORY
 Days inventory outstanding (DIO) = COGS
∗365

1187500
= 33980000 *365

= 12.76 (13DAYS)
AVG DEBTORS
 Days sales outstanding (DSO) = CREDIT SALES *365
282500
= 12600150 ∗365

= 8.18(8DAYS)
❑
 Days payable outstanding (DPO) = COGS 5
592500
= 33980000 ∗365

= 6.36 (6DAYS)

OPENING INVENTORY +CLOSING INVENTORY

AVG INVENTORY =
2
 2375000
= 2

= 1187500
NOTES

1.OPENING INVENTORY = Raw material + WIP + Finished goods

= 400000+80000+600000
= 1080000
2.CLOSING INVENTORY = Raw material + WIP + Finished goods
= 500000+70000+725000
= 1295000

pening inventory 1080000

Add: Manufacturing Costs
1045000
Add: Excise Duty 850000
Add: Total Purchases 32300000
Less: Closing inventory 1295000
Cost of goods sold 3398000
pening inventory 1080000
Add: Manufacturing Costs
1045000
Add: Excise Duty 850000
Add: Total Purchases 32300000
Less: Closing inventory 1295000
Cost of goods sold 3398000
3. COGS

pening inventory 1080000

Add: Manufacturing Costs
1045000
Add: Excise Duty 850000
Add: Total Purchases 32300000
Less: Closing inventory 1295000
Cost of goods sold 3398000Opening
inventory 1080000

Opening inventory 1080000

Add: Manufacturing Costs
1045000
Add: Excise Duty 850000
Add: Total Purchases 32300000
Less: Closing inventory 1295000
Cost of goods sold 33980000
Opening inventory 1080000
Add: Manufacturing Costs
1045000
Add: Excise Duty 850000
Add: Total Purchases 32300000
Less: Closing inventory 1295000
Cost of goods sold 33980000
Opening inventory = 1080000
Add: Manufacturing Costs = 1045000
Add: Excise Duty = 850000
Add: Total Purchases = 32300000
Less: Closing inventory = 1295000
Cost of goods sold = 33980000
4.AVERAGE DEBTORS = 250000+315000 /2
= 282500
5.AVG CREDITORS = 560000+625000 /2
= 592500

3. CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES

IN 2015
CR = 30301.09/32653.13
= 0.928

IN 2016
CR = 28075.57/31698.56
= 0.886

ACID TEST RATIO=CASH AND CASH EQUIVALENTS +MARKETABLE

SECURITIES+ACCOUNT RECIEVABLES / CURRENT LIABILITIES
IN 2015
1360..20+2561.14
ACID TEST RATIO= 32653.13

ACID TEST RATIO= 0.12

IN 2016
2067.35+2165.02
ACID TEST RATIO = 31698.56

ACID TEST RATIO = 0.13

3(B)