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  • Aman 1512 12

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    amansms20
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    Loving Candy Co. is investing Rs. 4 million in machinery that has a useful life of 8 years and salvage value of Rs. 40,000. Annual rent is Rs. 500,000 and depreciation is straight line method over 5 years. Production cost per candy is Rs. 0.50, marketing expense is Re. 1, and selling price is Rs. 2.50. The company expects to sell 20 million candies per year and maintain an average inventory of 5 million candies. The discount rate is 18% and tax rate is 34%.

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    AMAN 1512 12

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    Loving Candy Co. is investing Rs. 4 million in machinery that has a useful life of 8 years and salvage value of Rs. 40,000. Annual rent is Rs. 500,000 and depreciation is straight line method over 5 years. Production cost per candy is Rs. 0.50, marketing expense is Re. 1, and selling price is Rs. 2.50. The company expects to sell 20 million candies per year and maintain an average inventory of 5 million candies. The discount rate is 18% and tax rate is 34%.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
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    Download as xlsx, pdf, or txt
    19 views5 pages

    Aman 1512 12

    Uploaded by

    amansms20
    Loving Candy Co. is investing Rs. 4 million in machinery that has a useful life of 8 years and salvage value of Rs. 40,000. Annual rent is Rs. 500,000 and depreciation is straight line method over 5 years. Production cost per candy is Rs. 0.50, marketing expense is Re. 1, and selling price is Rs. 2.50. The company expects to sell 20 million candies per year and maintain an average inventory of 5 million candies. The discount rate is 18% and tax rate is 34%.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 5

    Loving Candy Co.

    Project Life (in yrs)


    Machinery
    Cost of each machinery
    Installation Cost
    Depreciation
    Rent Cost
    Expected Selling
    Price Per candy
    Production cost per candy
    Marketing expense per candy
    Average Inventory
    Discount Rate
    Assume Tax rate

    8
    400
    10000
    100
    SLM for 5 yrs
    500000/year
    2 million
    Rs. 2.50
    Rs. 0.50
    Re. 1.00
    500000
    18%
    34%

    Years
    Total Machine Cost
    Salvage Value
    Estimated Life(in yrs)
    Rent Cost
    Depreciated Amount

    1
    4000000
    40000
    5
    500000
    3460000
    Years
    1
    2
    3
    4
    5

    2
    4000000
    40000

    3
    4000000
    40000

    500000
    1730000

    500000
    1153333.333

    Total investment
    Cash Flows
    500000
    3460000
    500000
    1730000
    500000
    1153333.3
    500000
    865000
    500000
    692000

    4
    4000000
    40000

    5
    4000000
    40000

    500000
    865000

    500000
    692000

    Cum CIF
    PVF @ 34%
    NPV
    2960000
    0.7353
    2176488
    1230000
    0.5407
    665061
    653333.3
    0.3975 259699.987
    365000
    0.2923
    106689.5
    192000
    0.2149
    41260.8

    Cost
    Selling Quantity
    Price per candy
    Production Cost
    Marketing Expense
    Total Cost

    Add:Add:-

    Less:-

    (in Rs.)
    20000000
    2.5
    0.5
    1
    4
    Year
    Sales( in units)
    Selling Price
    Total
    Production cost
    Marketing Expense
    Total Cost

    Tax @ 34%

    1
    20000000
    2.5
    50000000
    10000000
    2000000
    62000000
    21080000

    2
    20000000
    2.5
    50000000
    10000000
    2000000
    62000000
    21080000

    3
    20000000
    2.5
    50000000
    10000000
    2000000
    62000000
    21080000

    4
    2000000
    2.5
    5000000
    10000000
    2000000
    17000000
    5780000

    5
    2000000
    2.5
    5000000
    10000000
    2000000
    17000000
    5780000

    6
    2000000
    2.5
    5000000
    10000000
    2000000
    17000000
    5780000

    7
    2000000
    2.5
    5000000
    10000000
    2000000
    17000000
    5780000

    8
    2000000
    2.5
    5000000
    10000000
    2000000
    17000000
    5780000

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