Name : Fraz khan

Roll# MCM-447
Q.11.16 page 454
a. 1200000*0.40 = 480,000
Incremental profits before tax and depreciation
1200000-480000 = 720,000 each year
b. Year   1 2 3 4  5     6
PBDT 720,000  720,000  720,000  720,000  720,000   720,000
Dep 400,000   640,000 380,000 240,000  240,000   100,000
NPBT 320,000   80,000 340,000 480,000 480,000    620,000
Tax 128,000     32,000    136,000  192,000 192,000   248,000
NPAT 192,000   48,000     204,000  288,000  288,000 372,000
C. Incremental Operating Cash Inflows = NPAT + Depreciation
592,000    688,000   584,000   528,000  528,000   472,000

Q. 11-18 page 455

Year 1     2    3      4   5            6
Incremental 16,000 16,000  16,000   16,000  16,000     0
Expense Saving
Incremental
PBDT 16,000 16,000  16,000   16,000  16,000     0
Dep 9,600   15,360   9,120    5,760 5,760       2,400
 NPBT 6,400   640     6880      10,240  10,240    -2,400
Tax 2,560   256   2,752      4,096 4,096         -960
NPAT 3,840 384   4,128      6,144 6,144     -1,440
Operating Cash 
Inflows 13,440 15,744  13,248   11,904  11,904 960
Q.11.19 Page 455
New Lathe
Year Revenue Expenses PBDT Dep NPBT 
Taxes  NPAT Operating Cash inflow
  (excluding dep)

1 40,000 30,000 10,000 2,000 8,000  

3,200   4,800 6,800
2 41,000 30,000 11,000 3,200 7,800  
3,120   4,680 7,880
3 42,000 30,000 12,000 1,900 10,100 
4,040   6,060 7,960
4 43,000 30,000 13,000 1,200 11,800  
4,720 7,080 8,280
5 44,000 30,000 14,000 1,200 12,800 
5,120  7,680 8,880
6 0 0 0 500 (500)  
(200)   (300)200
Old Lathe
1-5 years 35,000 25,000 10,000 0 10,000  
4,000  6,000 6,000

b. Calculation of Incremental Cash Inflows

Year New Lathe Old Lathe Incremental Cash Flows
1 6800 6,000 800
2 7,880 6,000 1,880
3 7,960 6,000 1,960
4 8,280 6,000 2,280
5 8,880 6,000 2,880
6 200  0 200

C. Cash Flows

  800      1,800    1,960   2,280      2,880        200 

0  1    2 3   4     5   6