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  • Projected Financials

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    Usman Ehsan
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    The document projects the financials of a new project that requires a total investment of $140 million over 5 years. It estimates revenues will start at $160 million in year 1 and increase annually by 10% to $234 million in year 5. Variable and fixed costs are also projected, resulting in estimated earnings before tax of $25-64 million annually. The net present value is calculated as $18.9 million using a 10% discount rate, indicating the project should be approved as it will earn more than the required rate of return.

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    The document projects the financials of a new project that requires a total investment of $140 million over 5 years. It estimates revenues will start at $160 million in year 1 and increase annually by 10% to $234 million in year 5. Variable and fixed costs are also projected, resulting in estimated earnings before tax of $25-64 million annually. The net present value is calculated as $18.9 million using a 10% discount rate, indicating the project should be approved as it will earn more than the required rate of return.

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

    Projected Financials

    Uploaded by

    Usman Ehsan
    The document projects the financials of a new project that requires a total investment of $140 million over 5 years. It estimates revenues will start at $160 million in year 1 and increase annually by 10% to $234 million in year 5. Variable and fixed costs are also projected, resulting in estimated earnings before tax of $25-64 million annually. The net present value is calculated as $18.9 million using a 10% discount rate, indicating the project should be approved as it will earn more than the required rate of return.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 1

    Projected Financials

    Investment Required
    (Millions)
    Plant 35
    Working Capital 50
    Promotional Activities 50
    Other Activities 5
    Total 140

    Profit & Loss a/c (Millions) (g=10%)


    Account Year 1 Year 2 Year 3 Year 4 Year 5
    Revenues 160.0 176.0 193.6 213.0 234.3
    Variable Cost -75.0 -82.5 -90.8 -99.8 -109.8
    Fixed Cost -50.0 -50.0 -50.0 -50.0 -50.0
    Other Expences -10.0 -10.0 -10.0 -10.0 -10.0
    Earning Before Tax (EBT)(Cash
    25.0 33.5 42.9 53.1 64.4
    Inflows)

    Required Rate of Earning of our company is 10%.

    NPV of the Project


    PV of Inflows OutFlows
    -22.7
    -27.7
    -32.2 140
    -36.3
    -40.0
    -158.9 140
    NPV +18.9

    Net Present Value (NPV) of our project is positive so we can go with the project and start
    working. Projection here is done only for five years just to show the payback time otherwise
    project have infinite life.

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