All Investors Point of View 0 1 2 3

Total Investment -50

Revenues 60 60 60
Operating Costs 42 42 42
Depreciation 4.50 3.83 3.25
Interest on Working Capital Advance 1.20 1.20 1.20
Interest on Term Loan 2.00 1.60 1.20
Profit Before Tax (PBT) (3-4-5-6-7) 10.30 11.38 12.35
Tax 3.09 3.41 3.70
Profit After Tax (PAT) 7.21 7.96 8.64
Net Salvage Value of Fixed Assets
Net Salvage Value of Current Assets
Initial Cash Flows -50
Operating Cash Flows [10+5+6(1-T)+7(1-T)] 13.95 13.75 13.58
Terminal Cash Flow (11+12)
Net Cash Flow (13+14+15) -50.00 13.95 13.75 13.58

* T = Tax Rate applicable to firm

 4 5 (in Rs. million)

60 60
42 42
2.76 2.35
1.20 1.20
0.80 0.40
13.24 14.05
3.97 4.22
9.27 9.84
5
20

13.43 13.30
25
13.43 38.30
 Equity Investors Point of View 0 1 2 3 4
Equity Funds -15
Revenues 60 60 60 60
Operating Costs 42 42 42 42
Depreciation 4.50 3.83 3.25 2.76
Interest on Working Capital Advance 1.20 1.20 1.20 1.20
Interest on Term Loan 2.00 1.60 1.20 0.80
Profit Before Tax (PBT) (3-4-5-6-7) 10.30 11.38 12.35 13.24
Tax 3.09 3.41 3.70 3.97
Profit Aftert Tax (PAT) 7.21 7.96 8.64 9.27
Net Salvage Value of Fixed Assets
Net Salvage Value of Current Assets
Repayment of Term Loan 4 4 4 4
Repayment of Working Capital Advance 0 0 0 0
Repayment of Trade Creditors 0 0 0 0
Initial Cash Flow -15
Operating Cash Flows (10+5) 11.71 11.79 11.90 12.03
Terminal or Liquidation Cash Flows -4.00 -4.00 -4.00 -4.00
(11+12-13-14-15)
Net Cash Flow (16+17+18) -15.00 7.71 7.79 7.90 8.03
 5 (in Rs. million)

60
42
2.35
1.20
0.40
14.05
4.22
9.84
5
20
4
10
5

12.18
6.00

18.18
 in Rs. Million
Cash Flow Estimation (K-Cin) 0 1 2 3 4
1 Capital Investment -100
2 Level of Net Working Capital 20 30 40 30 20
3 Revenues 100 150 200 150
4 Raw Material Cost 30 45 60 45
5 Labour Cost 20 30 40 30
6 Operating and Maintenance Cost 5 5 5 5
7 Loss of Contribution 15 15 15 15
8 Depreciation 15 12.75 10.84 9.21
9 Bad Debt Loss
10 Profit before Tax (3-4-5-6-7-8-9) 15 42.25 69.16 45.79
11 Tax 4.5 12.68 20.75 13.74
12 Profit after Tax (10-11) 10.5 29.57 48.41 32.05
13 Net Salvage Value of Equipment
14 Recovery of Net Working Capital
15 Capital Investment -100
16 Operating Cash Inflow (12+8+9) 25.5 42.32 59.25 41.26
17 Net Working Capital 20 10 10 -10 -10
18 Terminal Cash Inflow (13+14)
19 Net Cash Flow (15+16-17+18) -120 15.50 32.32 69.25 51.26
in Rs. Million
5

0
100
30
20
5
15
7.83
5
17.17
5.15
12.02
20
15

24.85

35
59.85
 Cash Flows for a Replacement Project 0 1 2 3
Investment Outlay
1 Cost of New Asset -1600
2 Salvage Value of Old Asset 500
3 Increase in Net Working Capital -100
4 Total Net Investment -1200
Operating Inflows
5 After-tax savings in Mfg. Costs 180 180 180
6 Depreciation on New Machine 240 204 173.40
7 Depreciation on Old Machine 60 51 43.35
8 Incremental Depreciation (6-7) 180 153 130.05
9 Tax Savings on Incremental Depreciation 54 45.90 39.02
10 Net Operating Cash Inflow (5+9) 234 225.90 219.02
Terminal Cash Inflow
11 Net Terminal Value of the New Machine
12 Net Terminal Value of the Old Machine
13 Recovery of Incremental NWC
14 Total Terminal Cash Inflow (11-12+13)
Net Cash Flow (4+10+14) -1200 234 225.90 219.02
 4 5 (in '000)

180 180
147.39 125.28
36.85 31.32
110.54 93.96
33.16 28.19
213.16 208.19

800
160
100
740
213.16 948.19