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  • Capital Budgeting - Assignment

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    Divyansh Saxena
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    The document provides details about a potential capital project being considered by a firm, including initial costs, sales projections, prices, costs, taxes, depreciation, and discount rate. It asks to calculate the net present value (NPV) of the project under baseline assumptions and under alternative optimistic and pessimistic scenarios that vary sales volumes, prices, costs, and overheads. The NPV should be found by first determining the estimated operating cash flow over the 5 year project life under each scenario.

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    Capital Budgeting_Assignment (1)

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    The document provides details about a potential capital project being considered by a firm, including initial costs, sales projections, prices, costs, taxes, depreciation, and discount rate. It asks to calculate the net present value (NPV) of the project under baseline assumptions and under alternative optimistic and pessimistic scenarios that vary sales volumes, prices, costs, and overheads. The NPV should be found by first determining the estimated operating cash flow over the 5 year project life under each scenario.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    8 views1 page

    Capital Budgeting - Assignment

    Uploaded by

    Divyansh Saxena
    The document provides details about a potential capital project being considered by a firm, including initial costs, sales projections, prices, costs, taxes, depreciation, and discount rate. It asks to calculate the net present value (NPV) of the project under baseline assumptions and under alternative optimistic and pessimistic scenarios that vary sales volumes, prices, costs, and overheads. The NPV should be found by first determining the estimated operating cash flow over the 5 year project life under each scenario.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Assignment Capital Budgeting

    A firm is considering a project for which the following details have been estimated:
    • Initial Cost: Rs 50,000, • Life of the project: 5 Years, • Annual Sales (Units): 5,000
    • Unit Price: Rs 70, • Variable Cost Per Unit (VCPU): Rs 10, • Overheads: Rs 20,000
    • Depreciation: Rs 10,000 in all years, • Tax Rate: 30% • Discount Rate: 9%
    Considering Salvage Value to be zero, find out the estimated operating cash flow
    and workout the net present value (NPV) of the base case given above. Further, find
    out the operating cash flow and NPV under the following scenarios as well:

    Scenario Pessimistic Optimistic

    Initial Cost 50000 50000

    Annual Sales 2000 8000

    Unit price 40 80

    Variable cost 4 8

    Overheads 40000 18000

    Depreciation 10000 each year 10000 each year

    Tax 30% 30%

    Life of project 5 5

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