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Financial Management - Homework 3 & 4
Financial Management - Homework 3 & 4
26.11.2021
Homework 3:
Task: You have been approached by the president of the company with a request to analyze the
project. Calculate the payback period, profitability index, average accounting return, net present
value, internal rate of return, and modified internal rate of return for the new strip mine. Should
Bethesda mining take the contract and open the mine?
Equipment - 95.000.000
Land - 6.500.000
NWC - 2.612.000
Cash flow today (total) - 104.112.000
Year 1 2 3 4 5 6
Sales 52.240.000 56.860.000 60.710.000 49.930.000
VC 19.220.000 21.080.000 22.630.000 18.290.000
FC 4.100.000 4.100.000 4.100.000 4.100.000 2.700.000 6.000.000
Dep. 13.575.500 23.265.500 16.615.500 11.865.500
EBT 15.344.500 8.414.500 17.364.500 15.674.500 - 2.700.000 - 6.000.000
Tax 3.836.125 2.103.625 4.341.125 3.918.625 675.000 1500.000
NI 11.508.375 6.310.875 13.023.375 11.755.875 -2.025.000 -4.500.000
+Dep. 13.575.500 23.265.500 16.615.500 11.865.500
OCF 25.083.875 29.576.375 29.638.875 23.621.375 -2.025.000 -4.500.000
Calculating the net working capital cash flow for each year:
Year 1 2 3 4
Beg. NWC 2.612.000 2.843.000 3.035.500 2.496.500
End NWC 2.843.000 3.035.500 2.496.500 0
NWC CF -231.000 -192.500 539.000 2.496.500
IRR = 15,09%
Answer: Yes, the company should accept the project because the net present value is higher than
zero.
Volkswagen BMW
Cost of capital 3.81%. 12 %