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    BD Assignment Team C - Fabian and Salma

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    Sarah Ananta
    This document presents financial projections for a 4 year project with revenue, direct costs, indirect costs, capital costs, taxes, and discounted cash flows. The internal rate of return (IRR) of 17.32% is greater than the company's weighted average cost of capital (WACC) of 14%, indicating the project should be pursued. Reducing indirect costs by 20% increases the IRR to 18.37%, further improving the project value.

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    BD Assignment Team C - Fabian and Salma

    Uploaded by

    Sarah Ananta
    7 views2 pages
    This document presents financial projections for a 4 year project with revenue, direct costs, indirect costs, capital costs, taxes, and discounted cash flows. The internal rate of return (IRR) of 17.32% is greater than the company's weighted average cost of capital (WACC) of 14%, indicating the project should be pursued. Reducing indirect costs by 20% increases the IRR to 18.37%, further improving the project value.

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    BD Assignment Team C_Fabian and Salma

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    This document presents financial projections for a 4 year project with revenue, direct costs, indirect costs, capital costs, taxes, and discounted cash flows. The internal rate of return (IRR) of 17.32% is greater than the company's weighted average cost of capital (WACC) of 14%, indicating the project should be pursued. Reducing indirect costs by 20% increases the IRR to 18.37%, further improving the project value.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    7 views2 pages

    BD Assignment Team C - Fabian and Salma

    Uploaded by

    Sarah Ananta
    This document presents financial projections for a 4 year project with revenue, direct costs, indirect costs, capital costs, taxes, and discounted cash flows. The internal rate of return (IRR) of 17.32% is greater than the company's weighted average cost of capital (WACC) of 14%, indicating the project should be pursued. Reducing indirect costs by 20% increases the IRR to 18.37%, further improving the project value.

    Copyright:

    © All Rights Reserved
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    of 2

    Discount Rate 18%

    Inflation Rate (Direct Cost) 3%


    Year 1 2 3 4
    Revenue $4,000,000.00 $3,750,000.00 $3,500,000.00 $3,250,000.00
    Direct Cost $1,400,000.00 $1,351,875.00 $1,261,750.00 $1,171,625.00
    Indirect Cost $700,000.00 $675,937.50 $630,875.00 $585,812.50
    Initial Capital Cash Outflow $200,000.00 $0.00 $0.00 $0.00
    Capital Mobilization charge $320,000.00 $0.00 $0.00 $0.00
    Import Taxes $240,000.00 $0.00 $0.00 $0.00
    Revenue (FV) $4,000,000.00 $4,573,170.73 $5,205,234.98 $5,894,429.85
    Direct Cost (FV) $1,707,317.07 $2,010,522.01 $2,288,399.04 $2,591,392.64
    Indirect Cost (FV) $853,658.54 $1,005,261.01 $1,144,199.52 $1,295,696.32
    FBOI 0.285 0.45925 0.45925 0.45925
    Average FBOI 0.45925
    Present Value (Revenue) $3,389,830.51 $2,693,191.61 $2,130,208.05 $1,676,313.84
    Cost $2,860,000.00 $2,027,812.50 $1,892,625.00 $1,757,437.50
    Nett Present Value $1,040,746.67
    IRR 0.1732741267
    Halliburton WACC 14%

    Should we continue to pursue this project?


    Yes, since IRR>Hal WACC it shows that this project will generate value for the company

    What can we do to improve the value of this project?


    Decreasing Indirect Cost by 20%, can increase IRR by 1%
    Case : Indirect Cost 40% of Direct Cost
    Year 1 2 3 4
    Revenue $4,000,000.00 $3,750,000.00 $3,500,000.00 $3,250,000.00
    Direct Cost $1,400,000.00 $1,351,875.00 $1,261,750.00 $1,171,625.00
    Indirect Cost $560,000.00 $540,750.00 $504,700.00 $468,650.00
    Initial Capital Cash Outflow $200,000.00 $0.00 $0.00 $0.00
    Capital Mobilization charge $320,000.00 $0.00 $0.00 $0.00
    Import Taxes $240,000.00 $0.00 $0.00 $0.00
    Revenue (FV) $4,000,000.00 $4,573,170.73 $5,205,234.98 $5,894,429.85
    Direct Cost (FV) $1,707,317.07 $2,010,522.01 $2,288,399.04 $2,591,392.64
    Indirect Cost (FV) $682,926.83 $804,208.80 $915,359.61 $1,036,557.05
    FBOI 0.32 0.4953 0.4953 0.4953
    Average FBOI 0.4953
    Present Value (Revenue) $3,389,830.51 $2,693,191.61 $2,130,208.05 $1,676,313.84
    Cost $2,720,000.00 $1,892,625.00 $1,766,450.00 $1,640,275.00
    Nett Present Value $1,667,421.67
    IRR 0.1837339421
    Halliburton WACC 14%
    5
    $3,000,000.00
    $1,081,500.00
    $540,750.00
    $0.00
    $0.00
    $0.00
    $6,635,380.70
    $2,917,139.93
    $1,458,569.96
    0.45925

    $1,311,327.65
    $1,622,250.00

    5
    $3,000,000.00
    $1,081,500.00
    $432,600.00
    $0.00
    $0.00
    $0.00
    $6,635,380.70
    $2,917,139.93
    $1,166,855.97
    0.4953

    $1,311,327.65
    $1,514,100.00

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