Scribd Logo
Upload

Welcome to Scribd!

  • Capital Budgeting (Work Book Question No. 01 (Part - III)

    Uploaded by

    Mahwish Khan
    31 views8 pages
    The document presents a capital budgeting analysis for a potential investment project over 4 years. It shows the projected cash flows, including sales, variable costs, fixed costs including depreciation, tax, and net cash flows. It applies discount rates to calculate the net present value of the project, which is positive, indicating the project should be accepted. Sales are projected to increase 15% per year. Fixed costs excluding depreciation increase 10% annually, while depreciation and working capital remain constant. The analysis is presented in 3 parts, varying the initial sales amount and variable costs percentage to demonstrate the sensitivity of the NPV to changes in assumptions.

    Original Description:

    Finance for managers

    Original Title

    Capital Bugding

    Copyright

    © © All Rights Reserved

    Available Formats

    XLSX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    The document presents a capital budgeting analysis for a potential investment project over 4 years. It shows the projected cash flows, including sales, variable costs, fixed costs including depreciation, tax, and net cash flows. It applies discount rates to calculate the net present value of the project, which is positive, indicating the project should be accepted. Sales are projected to increase 15% per year. Fixed costs excluding depreciation increase 10% annually, while depreciation and working capital remain constant. The analysis is presented in 3 parts, varying the initial sales amount and variable costs percentage to demonstrate the sensitivity of the NPV to changes in assumptions.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    31 views8 pages

    Capital Budgeting (Work Book Question No. 01 (Part - III)

    Uploaded by

    Mahwish Khan
    The document presents a capital budgeting analysis for a potential investment project over 4 years. It shows the projected cash flows, including sales, variable costs, fixed costs including depreciation, tax, and net cash flows. It applies discount rates to calculate the net present value of the project, which is positive, indicating the project should be accepted. Sales are projected to increase 15% per year. Fixed costs excluding depreciation increase 10% annually, while depreciation and working capital remain constant. The analysis is presented in 3 parts, varying the initial sales amount and variable costs percentage to demonstrate the sensitivity of the NPV to changes in assumptions.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 8

    Capital Budgeting (Work Book Question No.

    01 (Part
    Year
    I. Investment

    (320,000.00)

    Sales - (W-1)

    340,000.00

    Variable Cost

    (85,000)

    Fixed Cost W-2

    100,000

    Depreciation

    (80,000)

    Working Capital

    (40,000.00)

    Cash Flow Before Tax

    275,000.00

    Tax @ 30%

    (82,500)

    Cash Flow After Tax

    192,500

    Add Back Dep

    80,000

    Working Capital
    Net Cash Flows

    272,500

    Discout Rate @ 25%

    0.800
    (360,000.00)

    NPV

    218,000.00
    404,471.40

    ok Question No. 01 (Part -III)


    2

    W-1
    Years

    391,000.00

    449,650.00

    517,097.50

    (97,750)

    (112,413)

    (129,274)

    110,000

    121,000

    133,100

    (80,000)

    (80,000)

    (80,000)

    323,250.00

    378,237.50

    440,923.13

    W-2

    (96,975)

    (113,471)

    (132,277)

    226,275

    264,766

    308,646

    80,000

    80,000

    80,000

    36,000

    3
    4

    306,275

    344,766

    424,646

    0.640

    0.512

    0.410

    196,016.00

    176,520.32

    173,935.08

    Years

    15% increase
    per year

    Sales
    280,000.00

    3,400,000.00

    =(340,000x15%)+3400,000.00

    3,910,000.00

    =(3,910,000x15%)+322,000.00

    4,496,500.00

    =(370,700x15%)+370,700.00

    5,170,975.00

    Fixed cost
    100,000.00

    10% increase
    per year
    100,000.00

    =100,000*10%

    110,000.00

    =110,000*10%

    121,000.00

    =121,000*10%

    133,100.00

    Capital Budgeting (Work Book Question No. 01 (Part


    Year
    I. Investment

    0
    (320,000.00)

    Sales - (W-1)

    240,000.00

    Variable Cost

    (60,000)

    Fixed Cost Including Dep W-2

    (100,000)

    Depreciation
    Working Capital

    (80,000)
    (40,000.00)

    Cash Flow Before Tax

    Tax @ 30%

    Cash Flow After Tax

    Add Back Dep

    80,000

    Working Capital
    Net Cash Flows

    80,000

    Discout Rate @ 25%

    0.800
    (360,000.00)

    NPV

    64,000.00
    (156,326.40)

    ok Question No. 01 (Part -II)


    2

    240,000.00

    240,000.00

    240,000.00

    (60,000)

    (60,000)

    (60,000)

    (100,000)

    (100,000)

    (100,000)

    (80,000)

    (80,000)

    (80,000)

    80,000

    80,000

    80,000
    36,000

    80,000

    80,000

    116,000

    0.640

    0.512

    0.410

    51,200.00

    40,960.00

    47,513.60

    Capital Budgeting (Work Book Question No. 01 (Part


    Year
    I. Investment

    0
    (320,000.00)

    Sales - (W-1)

    280,000.00

    Variable Cost

    (70,000)

    Fixed Cost Including Dep W-2


    Working Capital

    (100,000)
    (40,000.00)

    Cash Flow Before Tax

    110,000.00

    Tax @ 30%

    (33,000)

    Cash Flow After Tax

    77,000

    Add Back Dep

    80,000

    Working Capital
    Net Cash Flows

    157,000

    Discout Rate @ 25%

    0.800
    (360,000.00)

    NPV

    125,600.00
    90,964.58

    ok Question No. 01 (Part -I)


    2

    W-1
    Years

    322,000.00

    370,300.00

    425,845.00

    (80,500)

    (92,575)

    (106,461)

    (102,000)

    (104,200)

    (106,620)

    3
    4

    139,500.00

    173,525.00

    212,763.75

    W-2

    (41,850)

    (52,058)

    (63,829)

    97,650

    121,468

    148,935

    80,000

    80,000

    80,000

    36,000

    3
    4

    177,650

    201,468

    264,935

    0.640

    0.512

    0.410

    113,696.00

    103,151.36

    108,517.22

    Years

    15% increase
    per year

    Sales
    280,000.00

    ###

    =(280,000x15%)+280,000.00

    322,000.00

    =(322,000x15%)+322,000.00

    370,300.00

    =(370,700x15%)+370,700.00

    425,845.00

    Dep

    Fixed cost

    10% increase
    per year

    80,000.00

    20,000.00

    20,000.00

    80,000.00

    102,000.00

    22,000.00

    80,000.00

    117,300.00

    24,200.00

    80,000.00

    134,895.00

    26,620.00

    You might also like