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  • Simpson and Selph Solution

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    Raju Sharma
    47 views8 pages
    This document contains cash flow projections for two carpet binding machine investments - the Harley and Davidson machines. For the Harley machine, the initial cash outflow is Rs. 310,000 with projected positive cash flows each year reaching Rs. 593,626 in net terminal cash flow. The investment metrics show a NPV of Rs. 571,187 and IRR of 61%. For the Davidson machine, the initial cash outflow is Rs. 415,000 with projected positive cash flows each year reaching Rs. 751,250 in net terminal cash flow. The Davidson machine investment shows a higher NPV of Rs. 620,869 and IRR of 52%.

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    Solution

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    This document contains cash flow projections for two carpet binding machine investments - the Harley and Davidson machines. For the Harley machine, the initial cash outflow is Rs. 310,000 with projected positive cash flows each year reaching Rs. 593,626 in net terminal cash flow. The investment metrics show a NPV of Rs. 571,187 and IRR of 61%. For the Davidson machine, the initial cash outflow is Rs. 415,000 with projected positive cash flows each year reaching Rs. 751,250 in net terminal cash flow. The Davidson machine investment shows a higher NPV of Rs. 620,869 and IRR of 52%.

    Copyright:

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

    Simpson and Selph Solution

    Uploaded by

    Raju Sharma
    This document contains cash flow projections for two carpet binding machine investments - the Harley and Davidson machines. For the Harley machine, the initial cash outflow is Rs. 310,000 with projected positive cash flows each year reaching Rs. 593,626 in net terminal cash flow. The investment metrics show a NPV of Rs. 571,187 and IRR of 61%. For the Davidson machine, the initial cash outflow is Rs. 415,000 with projected positive cash flows each year reaching Rs. 751,250 in net terminal cash flow. The Davidson machine investment shows a higher NPV of Rs. 620,869 and IRR of 52%.

    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

    Harley Carpet Binder

    Initial Cash-flow
    Year

    Add
    Add

    2005

    Machine Cost
    Installation
    Working Capital Required

    250000.00
    10000.00
    50000.00

    Total Initial Cash-flow

    310000.00

    less
    less
    less
    less
    =
    less
    =
    Add
    Add
    less
    =
    Working Schedules
    I

    II

    Project Evaluation
    ICF
    Year
    Cash-flow
    Net Cash-flows
    NPV
    IRR

    Operating
    2005
    2006
    310000.00 185300.00

    2007
    196349.75

    -310000 185300.00

    196349.75

    571,187.34
    61%

    Operating Cash-flows
    2006
    2007

    Year
    Revenue growing at 4.5%
    Variable Costs @ 41%
    Fixed Costs
    Depreciation Machine
    Depreciation Installation
    Operating Profit (EBIT)
    Tax @ 30%
    NOPAT or Earnings after Tax
    Depreciation Machine
    Depreciation Installation
    Change in WC to be financed
    Operating Cashflows

    ng Schedules
    Annual Depreciation Machine
    Book Value @ End of Year

    2008

    2009

    600000.00
    246000.00
    100000.00
    31250.00
    1250.00
    221500.00
    66450.00
    155050.00
    31250.00
    1250.00
    2250.00

    627000.00
    257070.00
    100000.00
    31250.00
    1250.00
    237430.00
    71229.00
    166201.00
    31250.00
    1250.00
    2351.25

    655215.00
    268638.15
    100000.00
    31250.00
    1250.00
    254076.85
    76223.06
    177853.80
    31250.00
    1250.00
    2457.06

    684699.68
    280726.87
    100000.00
    31250.00
    1250.00
    271472.81
    81441.84
    190030.97
    31250.00
    1250.00
    2567.62

    ###

    ###

    ###

    ###

    31250.00 31250.00 31250.00 31250.00


    218750.00 187500.00 156250.00 125000.00

    Annual Depreciation Installation


    Book Value @ End of Year
    Total Depreciation

    1250.00
    8750.00
    32500.00

    1250.00
    7500.00
    32500.00

    1250.00
    6250.00
    32500.00

    1250.00
    5000.00
    32500.00

    Working Capital Requirement


    Change in WC to be financed

    50000.00
    2250.00

    52250.00
    2351.25

    54601.25
    2457.06

    57058.31
    2567.62

    Operating Cash-flow

    Terminal Cashflow
    2008
    2009
    2010
    2010
    207896.74 219963.34 235256.11 157750.93
    207896.74 219963.34 393007.04

    2010
    715511.16
    293359.58
    100000.00
    31250.00
    1250.00
    289651.58
    86895.48
    202756.11
    31250.00
    1250.00
    0.00

    Year

    Add

    Cash-flow from Sale of Machine


    Recovery of Working Capital
    Total terminal cash-flow

    Terminal Cash-flow
    2010
    98125.00
    59625.93
    ###

    ###

    31250.00
    93750.00
    1250.00
    3750.00
    32500.00

    Working Schedules
    III
    Cash-flow from Sale of Machine
    Market Value
    less
    Book Value
    =
    Net Profit on Sale
    less
    Tax on Profit from Sale
    Cash-flow = inflow - outflow

    59625.93

    100000.00
    93750.00
    6250.00
    1875.00
    98125.00

    rminal Cash-flow

    Cash inflow
    Notional
    Notional
    Cash out-flow

    Davidson Carpet Binder


    Initial Cash-flow
    Year

    Add
    Add

    2005

    Machine Cost
    Installation
    Working Capital Required

    325000.00
    15000.00
    75000.00

    Total Initial Cash-flow

    415000.00

    less
    less
    less
    less
    =
    less
    =
    Add
    Add
    less
    =
    Working Schedules
    I

    II

    Project Evaluation
    ICF
    Year
    Cash-flow
    Net Cash-flows
    NPV
    IRR

    Operating
    2005
    2006
    415000.00 213900.00

    2007
    227004.00

    -415000.00 213900.00

    227004.00

    620,868.92
    52%

    Operating Cash-flows
    2006
    2007

    Year
    Revenue growing at 4.5%
    Variable Costs @ 36%
    Fixed Costs
    Depreciation Machine
    Depreciation Installation
    Operating Profit (EBIT)
    Tax @ 30%
    NOPAT or Earnings after Tax
    Depreciation Machine
    Depreciation Installation
    Change in WC to be financed
    Operating Cashflows

    ng Schedules
    Annual Depreciation Machine
    Book Value @ End of Year

    2008

    2009

    650000.00
    234000.00
    125000.00
    32500.00
    1500.00
    257000.00
    77100.00
    179900.00
    32500.00
    1500.00
    0.00

    679250.00
    244530.00
    125000.00
    32500.00
    1500.00
    275720.00
    82716.00
    193004.00
    32500.00
    1500.00
    0.00

    709816.25
    255533.85
    125000.00
    32500.00
    1500.00
    295282.40
    88584.72
    206697.68
    32500.00
    1500.00
    0.00

    741757.98
    267032.87
    125000.00
    32500.00
    1500.00
    315725.11
    94717.53
    221007.58
    32500.00
    1500.00
    0.00

    ###

    ###

    ###

    ###

    32500.00 32500.00 32500.00 32500.00


    292500.00 260000.00 227500.00 195000.00

    Annual Depreciation Installation


    Book Value @ End of Year
    Total Depreciation

    1500.00
    13500.00
    34000.00

    1500.00
    12000.00
    34000.00

    1500.00
    10500.00
    34000.00

    1500.00
    9000.00
    34000.00

    Working Capital Requirement


    Change in WC to be financed

    75000.00
    0.00

    75000.00
    0.00

    75000.00
    0.00

    75000.00
    0.00

    Operating Cash-flow

    Terminal Cashflow
    2008
    2009
    2010
    2010
    240697.68 255007.58 269961.42 211250.00
    240697.68 255007.58 481211.42

    2010
    775137.09
    279049.35
    125000.00
    32500.00
    1500.00
    337087.74
    101126.32
    235961.42
    32500.00
    1500.00
    0.00

    Year

    Add

    Cash-flow from Sale of Machine


    Recovery of Working Capital
    Total terminal cash-flow

    Terminal Cash-flow
    2010
    136250.00
    75000.00
    ###

    ###

    32500.00
    162500.00
    1500.00
    7500.00
    34000.00

    Working Schedules
    III
    Cash-flow from Sale of Machine
    Market Value
    less
    Book Value
    =
    Net Profit on Sale
    less
    Tax on Profit from Sale
    Cash-flow = inflow - outflow

    75000.00

    125000.00
    162500.00
    -37500.00
    -11250.00
    136250.00

    rminal Cash-flow

    Cash inflow
    Notional
    Notional
    Cash out-flow

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