Product Number: W25083

Title: Anwal Gas Traders: Capital Budgeting for Expansion Project-Instructor

Spreadsheet
This spreadsheet supports the product "Anwal Gas Traders: Capital
Budgeting for Expansion Project-Teaching Note" (25081)
Prepared by: Imran Yousaf, Zhichuan (Frank) Li, and Aaqib Nawaz

Last Revised: August 16, 2021

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 C

Anwal Gas Traders: Capital

Table of Contents:
Assignment Question 3 (Scenario 1)
Assignment Question 4 (Scenario 2)
Assignment Question 5 (Scenario 3)
Exhibit 1
Exhibit 2
Exhibit 3
Exhibit 4
Exhibit 5
Supporting Schedules
Salaries
Utilities
 Case Study

l Gas Traders: Capital Budgeting for Expansion Project

 Assignment
Initial Investment

Initial Investment, including WC (Rs) 95,100,000

WACC 14%

Lifetime of the Investment (years) 20

Salvage Value at the End of the Project (Rs) 35,150,000
Tax 29%

Year 1 2 3
Operating Cash Flow (Rs)
Prices/Unit 1,307 1,320 1,333
Material Cost/Unit 983 1,003 1,023
Annual Sales 212,160 216,403 220,731
Annual Sales Revenue 277,293,120 285,667,372 294,294,527

Operating Expenses
Raw Material 208,553,280 216,978,833 225,744,777
Plant Staff Costs 5,124,000 5,380,200 5,649,210
Other Utilities 2,136,000 2,242,800 2,354,940
Depreciation 3,636,650 3,636,650 3,636,650
General Administrative Staff Salaries 2,412,000 2,532,600 2,659,230
Miscellaneous Expense 180,000 189,000 198,450
Selling and Distribution Expense 8,318,794 8,570,021 8,828,836
Total Operating Expenses 230,360,724 239,530,104 249,072,093
EBIT 46,932,396 46,137,269 45,222,434
− Tax 13,610,395 13,379,808 13,114,506
Net Earnings 33,322,001 32,757,461 32,107,928
+ Depreciation 3,636,650 3,636,650 3,636,650

Total Operating Cash Flows 36,958,651 36,394,111 35,744,578

Terminal Cash Flow
Salvage Value
Total Cash Flow (95,100,000) 36,958,651 36,394,111 35,744,578

Discount Factor 0.88 0.77 0.67

Discounted Cash Flow (95,100,000) 32,419,870 28,004,086 24,126,572
Investment Returns
NPV (Rs) 93,068,445
IRR 36.0%
Profitability Index 1.98

Note: Rs = PKR = Pakistani rupee; Rs. 1 = US$0.0065 on February 16, 2021; WC = working capital; WACC = weight average c
Source: Company documents. -62680130 1
-2.24 2.23824942719
3.23824942719
Assignment Question 3
Discount rate

Increase/Decrease in Price 1%
Increase in Cost 2%
Increase/Decrease in Sales
Yearly 2%
Monthly Sales (Rs) 17,680
Annual Sales (Rs) 212,160
Increase in Sales Yearly
Price (Rs) 1,307
Cost (Rs) 983

4 5 6 7 8

1,347 1,360 1,374 1,387 1,401

1,043 1,064 1,085 1,107 1,129
225,146 229,649 234,242 238,927 243,705
303,182,222 312,338,325 321,770,942 331,488,425 341,499,375

234,864,866 244,353,407 254,225,285 264,495,986 275,181,624

5,931,671 6,228,254 6,539,667 6,866,650 7,209,983
2,472,687 2,596,321 2,726,137 2,862,444 3,005,567
3,636,650 3,636,650 3,636,650 3,636,650 3,636,650
2,792,192 2,931,801 3,078,391 3,232,311 3,393,926
208,373 218,791 229,731 241,217 253,278
9,095,467 9,370,150 9,653,128 9,944,653 10,244,981
259,001,904 269,335,374 280,088,989 291,279,911 302,926,009
44,180,317 43,002,950 41,681,953 40,208,513 38,573,366
12,812,292 12,470,856 12,087,766 11,660,469 11,186,276
31,368,025 30,532,095 29,594,187 28,548,045 27,387,090
3,636,650 3,636,650 3,636,650 3,636,650 3,636,650

35,004,675 34,168,745 33,230,837 32,184,695 31,023,740

35,004,675 34,168,745 33,230,837 32,184,695 31,023,740

0.59 0.52 0.46 0.40 0.35

20,725,578 17,746,175 15,139,522 12,862,205 10,875,653
al; WACC = weight average cost of capital; EBIT = earnings before interest and taxes; NPV = net present value; IRR = internal rate of retur
 2

10%

20.68%

9 10

1,415 1,429
1,152 1,175
248,579 253,551
351,812,656 362,437,398
-

286,298,962 297,865,440
7,570,482 7,949,006
3,155,845 3,313,637
3,636,650 3,636,650
3,563,623 3,741,804
265,942 279,239
10,554,380 10,873,122
315,045,882 327,658,897
36,766,774 34,778,501
10,662,364 10,085,765
26,104,409 24,692,736
3,636,650 3,636,650

29,741,059 28,329,386

35,150,000
29,741,059 63,479,386

0.31 0.27
9,145,612 17,123,171
lue; IRR = internal rate of return.
 Assignment Q
Initial Investment
Initial Investment (Rs) 95,100,000
WACC 14%

Lifetime of the Investment (years) 20

Salvage Value at the End of the Project (Rs) 35,150,000
Tax 35%

(Rs)
Year 1 2
Operating Cash Flow
Prices/Unit 1,307 1,346
Material Cost/Unit 983 1,003
Annual Sales 212,160 216,403
Annual Sales Revenue 277,293,120 291,324,152

Operating Expenses
Raw Material 208,553,280 216,978,833
Plant Staff Costs 5,124,000 5,380,200
Other Utilities 2,136,000 2,242,800
Depreciation 3,636,650 3,636,650
General Administrative Staff Salaries 2,412,000 2,532,600
Miscellaneous Expense 180,000 189,000
Selling and Distribution Expense 8,318,794 8,739,725
Total Operating Expenses 230,360,724 239,699,807
EBIT 46,932,396 51,624,345
− Tax 16,426,339 18,068,521
Net Earnings 30,506,058 33,555,824
+ Depreciation 3,636,650 3,636,650

Total Operating Cash Flows - 34,142,708 37,192,474

Terminal Cash Flow
Salvage Value
Total Cash Flow (95,100,000) 34,142,708 37,192,474

Discount Factor 0.88 0.77

Discounted Cash Flow (95,100,000) 29,949,744 28,618,401
Investment Returns
NPV (Rs) 157,063,908
IRR 42.5%
Profitability Index 2.65

Note: Rs = PKR = Pakistani rupee; Rs. 1 = US$0.0065 on February 16, 2021; WC = working capital; WACC = weight average c
Source: Company documents. -65150256 1.00
-2.28 2.28
3.28
Assignment Question 4
Discount rate
Increase/Decrease in
Price 3%
Increase in Cost 2%
Increase/ Decrease in
Sales Yearly 2%
Monthly Sales (Rs) 17,680
Annual Sales (Rs) 212,160
Increase in Sales Yearly
Price (Rs) 1,307
Cost (Rs) 983

3 4 5 6 7 8

1,387 1,428 1,471 1,515 1,561 1,607

1,023 1,043 1,064 1,085 1,107 1,129
220,731 225,146 229,649 234,242 238,927 243,705
306,065,154 321,552,051 337,822,585 354,916,407 372,875,178 391,742,661

225,744,777 234,864,866 244,353,407 254,225,285 264,495,986 275,181,624

5,649,210 5,931,671 6,228,254 6,539,667 6,866,650 7,209,983
2,354,940 2,472,687 2,596,321 2,726,137 2,862,444 3,005,567
3,636,650 3,636,650 3,636,650 3,636,650 3,636,650 3,636,650
2,659,230 2,792,192 2,931,801 3,078,391 3,232,311 3,393,926
198,450 208,373 218,791 229,731 241,217 253,278
9,181,955 9,646,562 10,134,678 10,647,492 11,186,255 11,752,280
249,425,212 259,552,999 270,099,902 281,083,353 292,521,514 304,433,307
56,639,942 61,999,051 67,722,682 73,833,055 80,353,664 87,309,354
19,823,980 21,699,668 23,702,939 25,841,569 28,123,782 30,558,274
36,815,962 40,299,383 44,019,744 47,991,485 52,229,881 56,751,080
3,636,650 3,636,650 3,636,650 3,636,650 3,636,650 3,636,650

40,452,612 43,936,033 47,656,394 51,628,135 55,866,531 60,387,730

40,452,612 43,936,033 47,656,394 51,628,135 55,866,531 60,387,730

0.67 0.59 0.52 0.46 0.40 0.35

27,304,361 26,013,659 24,751,237 23,521,084 22,326,351 21,169,466
rking capital; WACC = weight average cost of capital; EBIT = earnings before interest and taxes; NPV = net present value; IRR = internal ra
count rate
2
10%

20.68%

9 10

1,656 1,705
1,152 1,175
248,579 253,551
411,564,840 432,390,021
-

286,298,962 297,865,440
7,570,482 7,949,006
3,155,845 3,313,637
3,636,650 3,636,650
3,563,623 3,741,804
265,942 279,239
12,346,945 12,971,701
316,838,448 329,757,476
94,726,392 102,632,545
33,154,237 35,921,391
61,572,155 66,711,154
3,636,650 3,636,650

65,208,805 70,347,804

35,150,000
65,208,805 105,497,804

0.31 0.27
20,052,225 28,457,380
esent value; IRR = internal rate of return.

Cost of Equity 12%

Percent 50%
Cost of Debt 16%
Percent 50%
WACC 14%
 Assignment Ques
Initial Investment

Initial Investment (Rs) 95,100,000

WACC 15.00%

Lifetime of the Investment (years) 20

Salvage Value at the End of the Project (Rs) 35,150,000
Tax 29%

(Rs)
Year 1 2 3
Operating Cash Flow
Prices/Unit 1,307 1,320 1,333
Material Cost/Unit 983 1,003 1,023
Annual Sales 212,160 216,403 220,731
Annual Sales Revenue 277,293,120 285,667,372 294,294,527

Operating Expenses
Raw Material 208,553,280 216,978,833 225,744,777
Plant Staff Costs 5,124,000 5,380,200 5,649,210
Other Utilities 2,136,000 2,242,800 2,354,940
Depreciation 3,636,650 3,636,650 3,636,650
General Administrative Staff Salaries 2,412,000 2,532,600 2,659,230
Miscellaneous Expense 180,000 189,000 198,450
Selling and Distribution Expense 8,318,794 8,570,021 8,828,836
Total Operating Expenses 230,360,724 239,530,104 249,072,093
EBIT 46,932,396 46,137,269 45,222,434
− Tax 13,610,395 13,379,808 13,114,506
Net Earnings 33,322,001 32,757,461 32,107,928
+ Depreciation 3,636,650 3,636,650 3,636,650

Total Operating Cash Flows - 36,958,651 36,394,111 35,744,578

Terminal Cash Flow
Salvage Value
Total Cash Flow (95,100,000) 36,958,651 36,394,111 35,744,578

Discount Factor 0.87 0.76 0.66

Discounted Cash Flow (95,100,000) 32,137,958 27,519,176 23,502,640
Investment Returns
NPV (Rs) 85,814,857
IRR 36.0%
Profitability Index 1.90

Note: Rs = PKR = Pakistani rupee; Rs. 1 = US$0.0065 on February 16, 2021; WC = working capital; WACC = weight average c
Source: Company documents. -62962042 1.00
-2.29 2.29
3.29
signment Question 5
Discount rate

Increase/Decrease
in Price (Rs) 1%
Increase in Cost 2%

Increase/ Decrease
in Sales Yearly 2%
Monthly Sales (Rs) 17,680
Annual Sale (Rs) 212,160
Increase in Sales Yearly
Price (Rs) 1,307
Cost (Rs) 983

4 5 6 7 8 9

1,347 1,360 1,374 1,387 1,401 1,415

1,043 1,064 1,085 1,107 1,129 1,152
225,146 229,649 234,242 238,927 243,705 248,579
303,182,222 312,338,325 321,770,942 331,488,425 341,499,375 351,812,656

234,864,866 244,353,407 254,225,285 264,495,986 275,181,624 286,298,962

5,931,671 6,228,254 6,539,667 6,866,650 7,209,983 7,570,482
2,472,687 2,596,321 2,726,137 2,862,444 3,005,567 3,155,845
3,636,650 3,636,650 3,636,650 3,636,650 3,636,650 3,636,650
2,792,192 2,931,801 3,078,391 3,232,311 3,393,926 3,563,623
208,373 218,791 229,731 241,217 253,278 265,942
9,095,467 9,370,150 9,653,128 9,944,653 10,244,981 10,554,380
259,001,904 269,335,374 280,088,989 291,279,911 302,926,009 315,045,882
44,180,317 43,002,950 41,681,953 40,208,513 38,573,366 36,766,774
12,812,292 12,470,856 12,087,766 11,660,469 11,186,276 10,662,364
31,368,025 30,532,095 29,594,187 28,548,045 27,387,090 26,104,409
3,636,650 3,636,650 3,636,650 3,636,650 3,636,650 3,636,650

35,004,675 34,168,745 33,230,837 32,184,695 31,023,740 29,741,059

35,004,675 34,168,745 33,230,837 32,184,695 31,023,740 29,741,059

0.57 0.50 0.43 0.38 0.33 0.28

20,014,037 16,987,905 14,366,608 12,099,419 10,141,716 8,454,265
al; WACC = weight average cost of capital; EBIT = earnings before interest and taxes; NPV = net present value; IRR = internal rate of return
 2

10%

20.68%

10

1,429
1,175
253,551
362,437,398
-

297,865,440
7,949,006
3,313,637
3,636,650
3,741,804
279,239
10,873,122
327,658,897
34,778,501
10,085,765
24,692,736
3,636,650

28,329,386

35,150,000
63,479,386

0.25
15,691,133
value; IRR = internal rate of return.
EXHIBIT 1: ANWAL GAS TRADERS' INCOME STATEMENTS, 2019–2020 (Rs)

2020 2019
LPG 91,400,000 83,793,000
LPG Bottles 2,810,000 2,473,800
LPG Accessories 400,000 385,950
Total Net Revenue 94,610,000 86,652,750

Cost of Goods Sold 72,456,000 65,603,200

Gross Profit 22,154,000 21,049,550

Expenses
Advertising & Promotion 120,000 111,600
Depreciation & Amortization 240,000 223,200
Insurance 120,000 111,600
Maintenance 914,000 839,790
Office Supplies 120,000 111,600
Rent 600,000 558,000
Salaries, Benefits & Wages 1,080,000 1,004,400
Telecommunication 48,000 44,640
Vehicle Rent 4,570,000 4,198,950
Utilities 120,000 111,600
Total Expenses 7,932,000 7,315,380
Earnings before Interest & Taxes 14,222,000 13,734,170

Interest Expense 0 0
Earnings before Taxes 14,222,000 13,734,170

Income Taxes 2,844,400 2,746,834

Net Earnings 11,377,600 10,987,336

Note: Rs = PKR = Pakistani rupee; Rs. 1 = US$0.0065 on February 16, 2021; LPG = liquefied petroleum gas.
Source: Company documents.
EXHIBIT 2: WATERFALL CHART OF ANWAL GAS TRADERS' NEW EARNINGS, 2020 (Rs THOUSANDS)

Note: Rs = PKR = Pakistani rupee; Rs. 1 = US$0.0065 on February 16, 2021; COGS = cost of goods sold; EBIT = earnings bef
Source: Company documents.
OUSANDS)

ods sold; EBIT = earnings before interest and taxes.

 EXHIBIT 3: ANWAL GAS TRADERS' LPG DISTRIBUTION PROCESS

Note: LPG = liquefied petroleum gas.

Source: Company documents.
 EXHIBIT 4: ANWAL GAS TRADERS' MACHINE AND EQUIPMENT COSTS

Machine Required Number of Units Unit Price (Rs)

Storage Tank + Pump + Filling Dispenser
2 2,361,600
Single Unit = 160 Metric Tons
Cylinders:
11.8 Kilograms 600 5,000
45.4 Kilograms 600 8,000
Support Structure
Firefighting Equipment
Total

Note: Rs = PKR = Pakistani rupee; Rs. 1 = US$0.0065 on February 16, 2021.

Source: Company documents.
AND EQUIPMENT COSTS

Total Cost (Rs) Local/Imported

46,800,000 Imported

3,000,000 Local
4,800,000 Local
500,000 Local
1,500,000 Local
56,600,000
 EXHIBIT 5: ANWAL GAS TRADERS' SALARIES, FACTORY AND ADMINISTRATIVE STAFF

Staff Title No. of People Individual Salary (Rs)

Plant Incharge 1 105,000
Supervisor
Operations 1 55,000
Dispatch 1 45,000
Dispenser 3 32,000
Clerk 2 18,000
Technical Staff 2 24,000
Guard 3 14,000
Total Plant Staff 13 293000
General Administration Staff
Marketing Manager 1 40,000
Accountant 1 45,000
Office Assistant 2 14,000
Driver 4 22,000
Total Head Office Staff 8 121,000
Total 21 414,000

Note: Rs = PKR = Pakistani rupee; Rs. 1 = US$0.0065 on February 16, 2021.

Source: Company documents.
RATIVE STAFF

Monthly (Rs)
105,000

55,000
45,000
96,000
36,000
48,000
42,000
427000

40,000
45,000
28,000
88,000
201,000
628,000
Salaries No. of People
Total Months 12
Annual Increase in Salaries 5%
Annual Increase in Miscellaneous Ex 5%

Staff Title No. of People Individual Salary (Rs) Monthly (Rs)

Plant Incharge 1 105,000 105,000
Supervisor
Operations 1 55,000 55,000
Dispatch 1 45,000 45,000
Dispenser 3 32,000 96,000
Clerk 2 18,000 36,000
Technical Staff 2 24,000 48,000
Guard 3 14,000 42,000
Total Plant Staff 13 293000 427000

General Administration Staff No. of People Individual Salary (Rs) Monthly (Rs)
Marketing Manager 1 40,000 40,000
Accountant 1 45,000 45,000
Office Assistant 2 14,000 28,000
Driver 4 22,000 88,000
Total Head Office Staff 8 121,000 201,000
Total Salary Expense 21 414,000 628,000

Note: Rs = PKR = Pakistani rupee; Rs. 1 = US$0.0065 on February 16, 2021.

Source: Company documents.
 Salaries

Annual (Rs)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
1,260,000 1,323,000 1,389,150 1,458,608 1,531,538 1,608,115

660,000 693,000 727,650 764,033 802,234 842,346

540,000 567,000 595,350 625,118 656,373 689,192
1,152,000 1,209,600 1,270,080 1,333,584 1,400,263 1,470,276
432,000 453,600 476,280 500,094 525,099 551,354
576,000 604,800 635,040 666,792 700,132 735,138
504,000 529,200 555,660 583,443 612,615 643,246
5,124,000 5,380,200 5,649,210 5,931,671 6,228,254 6,539,667

480,000 504,000 529,200 555,660 583,443 612,615

540,000 567,000 595,350 625,118 656,373 689,192
336,000 352,800 370,440 388,962 408,410 428,831
1,056,000 1,108,800 1,164,240 1,222,452 1,283,575 1,347,753
2,412,000 2,532,600 2,659,230 2,792,192 2,931,801 3,078,391
7,536,000 7,912,800 8,308,440 8,723,862 9,160,055 9,618,058
Year 7 Year 8 Year 9 Year 10
1,688,521 1,772,947 1,861,594 1,954,674

884,463 928,686 975,121 1,023,877

723,652 759,834 797,826 837,717
1,543,790 1,620,980 1,702,029 1,787,130
578,921 607,867 638,261 670,174
771,895 810,490 851,014 893,565
675,408 709,179 744,638 781,869
6,866,650 7,209,983 7,570,482 7,949,006

643,246 675,408 709,179 744,638

723,652 759,834 797,826 837,717
450,272 472,786 496,425 521,246
1,415,141 1,485,898 1,560,193 1,638,203
3,232,311 3,393,926 3,563,623 3,741,804
10,098,961 10,603,909 11,134,104 11,690,809
 Utilities (Rs)
Monthly Annual Year 1 Year 2
Electricity 115,000.00 1,380,000.00 Electricity 1,380,000.00 1,449,000.00
Fuel 40,000.00 480,000.00 Fuel 480,000.00 504,000.00
Water 3,000.00 36,000.00 Water 36,000.00 37,800.00
Telephone 20,000.00 240,000.00 Telephone 240,000.00 252,000.00
Total 178,000 2,136,000 Total 2,136,000 2,242,800

Annual Increase 5%
Months 12

Note: Rs = PKR = Pakistani rupee; Rs. 1 = US$0.0065 on February 16, 2021.

Source: Company documents.
Utilities (Rs)
Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
1,521,450.00 1,597,522.50 1,677,398.63 1,761,268.56 1,849,331.98 1,941,798.58 2,038,888.51 2,140,832.94
529,200.00 555,660.00 583,443.00 612,615.15 643,245.91 675,408.20 709,178.61 744,637.54
39,690.00 41,674.50 43,758.23 45,946.14 48,243.44 50,655.62 53,188.40 55,847.82
264,600.00 277,830.00 291,721.50 306,307.58 321,622.95 337,704.10 354,589.31 372,318.77
2,354,940 2,472,687 2,596,321 2,726,137 2,862,444 3,005,567 3,155,845 3,313,637