Chapte

3
Capital investment r
Decisions

Chapter Outline

Define capital Budgeting.

Techniques/Methods of Capital Budgeting.

Multiple IRR. Distinguish between multiple IRR and modified IRR.

Capital budget process

Describe the Categories of Capital Budgeting Projects

Which of the capital budgeting techniques is the best and why?

Which of the net present value method and internal rate of return method is superior and

why?

Why are capital budgeting so important?

Under what circumstances do the net present value and internal rate of return methods

differ? What method would you prefer and why?

Significance of capital budgeting

Features/Importance/Objective/Advantage of Capital Budgeting

Mathematical Problems, Solution, Formula & Exercise

3.01 Capital Budgeting.
The investment decisions of a firm are generally known as the capital budgeting.

Capital budgeting means planning for capital assets. It is a complex process as it

involves decisions relating to the investment of current funds for the benefit

to be achieved in future.

Definition “Capital budgeting” has been formally defined as follows:

1. “The capital budgeting generally refers to acquiring inputs with long- term

returns”. - Richards & Greenlaw

2. Capital budgeting is the evaluating long-term investment proposals, usually

for plant and equipment. -Benton.

3. Capital budgeting is the process of identifying, analyzing and selecting

investment projects whose returns are expected to extend beyond one

year. -Van Home.

4. “Capital budgeting is long-term planning for making and financing proposed

capital outlay”. - Charles T. Horngreen

From the above decisions we can say that capital budgeting is the process of

identifying, evaluating, determining and selecting long-term investment proposal

whose returns are expected over the one year.

The basic features of capital budgeting decisions are:

 There is an investment in long term activities

 Current funds are exchanged for future benefits

 The future benefits will be available to the firm over series of years.

3.02 Explain the techniques/Methods of Capital Budgeting.

The most important part of capital budgeting is evaluation techniques. Included in the

methods of appraising an investment proposal are those which are objective, quantified

and based on economic costs and benefits. The methods of evaluating capital expenditure

proposals can be classified into two broad categories:

(A) Traditional Methods and

(B) Discounted Cash flow Methods.

A. Traditional Methods:

i. Pay back period (PBP)

ii Average Rare of Return(ARR)

B. Discounted Cash flow Methods:

i.Net Present value

ii. Internal Rate of Return(IRR)

iii. Profitability Index(PI)

iv. Discounted Pay Back Period (DPBP)

A. Traditional Methods: Traditional methods are pay back period (PBP) and average

rate of return (ARR). Although we would like to omit them, but we cannot. Since they

continue to be widely used by managers.

B. Discounted Cash Flow (DCF) Methods: The DCF methods are theoretically

superior. The DCF methods are more popularly known as they take the time factor into

account.

Discounted Cash Flow (DCF) Method:

The renowned economist, Professor Keynes argued that the level of investment

depends on profitability which is a comparison of expenditure necessary with the

present value of the flow of future receipts discounted at an appropriate rate of

interest. If the value the discounted flow of expected earnings is greater than the
outflow, the investment is profitable. The measures of investment worth that use the

timing of the cash flows, in these measures the concept of the present value of a

future sum is utilized, they popularly known as discount cash flow (DCF) methods.

So, DCF method is a technique of evaluating the profitability of investment in ca

projects. In other words, DCF is a method of measuring investment worth which

into account the time value of money and discounts the expected future earnings

from) proposed investment with an appropriate rate of interest.

3.03. Multiple IRR? Distinguish between multiple IRR and modified IRR.

Modified internal rate of return is a solution to the shortcomings of internal rate

of return as a project evaluation technique. There are two major disadvantages of

IRR. One is Multiple IRR and the other one is the impractical assumption of

reinvesting positive cash flows at the rate of project IRR.

Definition of Modified Internal Rate of Return:

It is a comprehensive method to calculate the IRRs of the projects with uneven

cash flows i.e. a mix of more than one positive and negative cash flow. It not only

provides a solution to above situation but also assumes a practically valid

reinvestment rate for positive cash flows.

Formula for Modified Internal rate of Return (MIRR):

The formula for MIRR is as follows:

MIRR = (Future Value of Positive Cash Flows at the Cost Of Capital of the Firm /

Present Value of all Negative Cash Flows at the Financing Cost of the Firm) ^(1/n) – 1

Modified Internal Rate of Return

Modified internal rate of return (MIRR) is an improved version of the internal rate

of return (IRR) approach to capital budgeting decisions. It does not require the

assumption that the project cash flows are reinvested at the IRR; rather, it

factors in a discrete reinvestment rate into the model.

Decision rule: projects with MIRR greater the project's hurdle rate should be

accepted; while in case of mutually exclusive projects, the project with higher

MIRR should be preferred.

3.04. Capital budget process

Capital Budgeting Process: The capital budgeting process includes identifying and

then evaluating capital projects for the company. Capital projects are the ones

where the cash flows are received by the company over longer periods of time

which exceeds a year. Almost all the corporate decisions that impact future

earnings of the company can be studied using this framework. This process can be

used to examine various decisions like buying a new machine, expanding operations

at another geographic location, moving the headquarters or even replacing the old

asset. These decisions have a power to impact the future success of the company.

This is the reason the capital budgeting process is an invaluable part of any

company.

The capital budgeting process has the following four steps:

 Generation of Ideas: The generation of good quality project ideas is the

most important capital budgeting step. Ideas can be generated through a

number of sources like senior management, employees and functional

divisions or even from outside the company.

 Analysis of Proposals: The basis of accepting or rejecting a capital project

is the project’s expected cash flows in the future. Hence, all the project

proposals are analysed by forecasting their cash flows to determine

expected profitability of each project.

 Creating the Corporate Capital Budget: Once the profitable projects are

shortlisted, they are prioritized according to the available company

resources, timing of the cash flows of the project and the overall strategic

plan of the company. Some projects may be attractive on their own, but may

not be a fit to the overall strategy.

  Monitoring and Post-Audit: A follow up on all decisions is equally important

in the capital budgeting process. The analysts compare the actual results of

the projects to the projected ones and the project managers are

responsible if the projections match or do not match the actual results. A

post-audit to recognize systematic errors in the cash flow forecasting

process is also essential as the capital budgeting process is as good as the

inputs’ estimates into the forecasting model.

3.05. Comparison of the NPV and IRR Method. What method would

you prefer and why?

The NPV and IRR methods are two closely related investment criteria. Both are

time adjusted methods of measuring investment worth. Two methods lead to same

decisions. However, under certain situations a conflict arises between them:

Topics NPV Method IRR Method

1. Definition NPV is the present value of IRR is the rate of return

the future cash flows, that equates the present

discounted at required rate value of a series of cash

of return minus the initial inflows with the initial

investment for the project. investment.

2. Objective To calculate the net value. To calculate the require

3. Method It uses discounting method. rate.uses

It trial and error

method rate use as require

4. Discount Rate Discount rate uses as cost of Discount

capital. rate of return.

5. Cash flow Get positive, negative or zero Get zero cash flow.

cash flows.
6. Profitable If NPV is positive, the If IRR is greater than cost

project is profitable. of capital, the project is

7. Dependent It does not depend on other It depends on NPV method.

method.
8. Easy It is so easy and usable. It is heard and critical.

9. Formula NPV= PV of CFAT- NCO C

× (B − A)
IRR = A + C − D
10. Decision If NPV is positive, project is If IRR is greater than cost

accepted. of capital, project is

NPV is the best because: accepted.

1.NPV gives important to the time value of money.

2.In the calculation of NPV, both after cash flow and before cash flow over the

life span of the project are considered.

3. Profitability and risk of the projects are given high priority.

4. NPV helps in maximizing the firm's value

3.06. Significance of capital budgeting.

Long-term Applications:

Implies that capital budgeting decisions are helpful for an organization in the long

run as these decisions have a direct impact on the cost structure and future

prospects of the organization. In addition, these decisions affect the

organization’s growth rate.

Therefore, an organization needs to be careful while making capital decisions as

any wrong decision can prove to be fatal for the organization. For example, over-
investment in various assets can cause shortage of capital to the organization,

whereas insufficient investments may hamper the growth of the organization.

Competitive Position of an Organization:

Refers to the fact that an organization can plan its investment in various fixed

assets through capital budgeting. In addition, capital investment decisions help the

organization to determine its profits in future. All these decisions of the

organization have a major impact on the competitive position of an organization.

Cash Forecasting:

Implies that an organization needs a large amount of funds for its investment

decisions. With the help of capital budgeting, an organization is aware of the

required amount of cash, thus, ensures the availability of cash at the right time.

This further helps the organization to achieve its long-term goals without any

difficulty.

Maximization of Wealth:

Refers to the fact that the long-term investment decisions of an organization

helps in safeguarding the interest of shareholders in the organization. If an

organization has invested in a planned manner, shareholders would also be keen to

invest in the organization. This helps in maximizing the wealth of the organization.

Capital budgeting helps an organization in many ways. Thus, an organization needs

to take into consideration various aspects.

Other Factors. The following other factors can also be considered for its

significance:-
It assist in formulating a sound depreciation and assets replacement policy.

It may be useful n considering methods of coast reduction. A reduction campaign

may necessitate the consideration of purchasing most up-to—date and modern

equipment.

The feasibility of replacing manual work by machinery may be seen from the

capital forecast be comparing the manual cost an the capital cost.

The capital cost of improving working conditions or safety can be obtained

through capital expenditure forecasting.

It facilitates the management in making of the long-term plans an assists in the

formulation of general policy.

It studies the impact of capital investment on the revenue expenditure of the firm

such as depreciation, insure and there fixed assets.

3.07. Features/Importance/Objective/Advantage of Capital

Budgeting.
Capital budgeting plays a vital role in the future investment of a firm. Capital

budgeting is important is financial management because of the followings:

1. Proper Investment: Long-term asset is expanded in order to cope

with future demand, so it is related to expect future earning. Capital

 budgeting is essential before a decision to invest long-term asset is made.

2. Planning: Capital budgeting program would arrange it's financing several

years in advance to be sure of having the funds required for the expansion.

3. To achieve Long-term Loan: Capital budgeting needs is accurate to

achieve long-term financial goal. For this purpose, it is evaluating and

selecting long-term investment.

4. Expansion: Capital budgeting is to expand the level of operation, usually

through acquisition of fixed assets.

5. Replacement: As a firm's growth slows and it reaches maturity, most

capital budgeting will be made to replace or new obsolete or worn-out

assets.

6. Renewal: Renewal, an alternative to replacement may involve rebuilding an

existing fixed asset by capital budgeting.

7. Acquisition: Capital budgeting results in the acquisition or transformation

of tangible fixed assets.

8. Cost Minimize: It may be useful considering methods of reducing

costs. A cost reduction companion may necessitate the consideration of

purchasing more up-to-date fixed asset.

9. Feasibility Study: The feasibility of replacing manual work by capital

budgeting be seen from the capital forest.

10. Policy Formulation: If facilitates the making of long-term plans and

assists in the formulations of general policy.

3.08. Categories of Capital Budgeting Projects

Categories of Capital Budgeting Projects:

Capital budgeting projects are categorized as follows:

 Replacement Projects for Maintaining Business: Such projects are

implemented without any detailed analysis. The only issues pertaining to

these types of projects are firstly whether the existing operations continue

and, if they do so, whether the existing processes should be changed or

maintained as such.

 Replacement Projects for Reducing Cost: Such projects are implemented

after a detailed analysis because these determine whether the obsolete, but

still operational, equipment should be replaced.

 Expansion Projects: Such projects require a very detailed analysis. These

projects are undertaken to expand the business operations and involve a

process of making complex decisions as they are based on an accurate

forecast of future demand.

 New Product/Market Development: Such projects also consist of making

complex decisions that require a detailed analysis as there is a great amount

of uncertainty involved.

 Mandatory Projects: Such projects are required by an insurance company

or a governmental agency and often involve environmental or safety-related

concerns. These projects will not generate any revenue, but they surely

accompany new projects started by the company to produce revenue.

 Other Projects: Some projects that cannot be easily analyzed fall into this

category. A pet project involving senior management or a high risk project

that cannot be analyzed easily with typical assessment methods are included

in such projects.
3.09. Importants/Needs of Capital budgeting

Capital budgeting is the process of evaluating and selecting long-term investments

that are consistent with the goal of the firm. The need and importance of capital

budgeting has been explained as follows:

1. Long-term Implication

Capital expenditure decision affects the company's future cost structure over a

long time span. The investment in fixed assets increases the fixed cost of the firm

which must be recovered from the benefit of the same project. If the investment

turns out to be unsuccessful in future or give less profit than expected, the

company will have to bear the extra burden of fixed cost. Such risk can be

minimized through the systematic analysis of projects which is the integral part of

investment decision.

2. Irreversible Decision

Capital investment decision are not easily reversible without much financial loss to

the firm because there may be no market for second-hand plant and equipment and

their conversion to other uses may not be financially viable. Hence, capital

investment decisions are to be carried out and performed carefully and effectively

in order to save the company from such financial loss. The investment decision

which is undertaken carefully and effectively can save the firm from huge financial

loss aroused due to the selection of unfavorable projects.

3. Long-term Commitments Of Funds

Capital budgeting decision involves the funds for the long-term. So, it is long-term
investment decision. The long-term commitment of funds leads to the financial

risk. Hence, careful and effective planning is must to reduce the financial risk as

much as possible.

4. Involvement of large amount of funds: Capital budgeting decisions need

substantial amount of capital outlay. This underlines the need for thoughtful, wise

and correct decisions as an incorrect decision would not only result in losses but

also prevent the firm from earning profit from other investments which could not

be undertaken.

5. Risk and uncertainty: Capital budgeting decision is surrounded by great number

of uncertainties. Investment is present and investment is future. The future is

uncertain and full of risks. Longer the period of project, greater may be the risk

and uncertainty. The estimates about cost, revenues and profits may not come

true.

6. Help in Depreciation Policy: It assists in formulating a sound depreciation and

assets replacement policy.

7. Cost reduction: It may be useful in considering methods of cost reduction as a

cost reduction campaign may necessitate the consideration of purchasing most up

to date and modern equipment.

8. Cost of safety: The capital cost of improving working conditions or safety can

be obtained through capital expenditure forecasting.

9. Long term Plans: It facilities the management in making of the long term plans

and assists in the formulation of general policy.

CAPITAL BUDGETING
 Capital Budgeting Techniques

A) Traditional Method

1. Pay Back Period (PBP)

2. Pay Back Reciprocal (PBR)

3. Average/ Accounting Rate of Return (ARR)

4. Return on Investment (ROI)

B) Discounted Cash flow Method

1. Net Present Value (NPV)

2. Internal Rate of Return (IRR)

3. Profitability Index (PI)

 Important Factors

# Tax Effect

Cash flows to be considered for purposes of capital budgeting are net of taxes.

Special consideration needs to be given to tax effects on cash flows if the firm is

incurring losses and, therefore, paying no taxes. The tax laws permit carrying

losses forward to be set off against future income. In such cases, therefore, the

benefits of tax savings would accrue in future years.

# Effect of Depreciation

Depreciation, although a non-cash, item of cost, is deductible expenditure in

determining taxable income. Depreciation provisions are prescribed by the

Companies Act for accounting purposes and by the Income Tax for taxation

purposes.
The amount of annual depreciation on an asset is determined by the actual cost of

the asset. The actual cost means the cost of acquisition of the asset and the

expenses incidental thereto which are necessary to put the asset in a useable

state, for instance – freight and carriage inwards, installation charges and

expenses incurred to facilitate the use of the asset like expenses in the training of

the operator or on essential construction work.

# Effect of Working Capital (WC)

Working Capital (WC) constitutions another important ingredient of the cashflow

stream which is directly related to an investment proposal. The term WC is used in

net sense, that is current assets minus current liabilities (Net Working Capital)

The increased WC forms part of the initial cash outlay (outflow). This will however,

be returned to the firm at the firm at the end of the project’s life. Therefore, the

recovery of WC becomes part of the cash flow stream in the terminal year.

The increase in the WC may not only be in the zero year, that is, at the time of

initial investment. There can be continuous increase in the WC as sales increase in

later years. This increase in WC should be considered as cash outflow of the year

in which additional WC in required.

# Project Classifications

1. Replacement:

(a) maintenance of business

(b) cost reduction

2. Expansion:

(a) of existing products or markets

(b) into new products or markets

3. Safety/environmental projects

4. Research and developments

5. Long-term contracts

# Economic Life vs Physical Life

Projects are normally analysis under the assumption that the firm will operate the

assets over its full physical life.

However, the above may not be the best course of action – it may be best to

terminate a project before the end of its potential life and this possibility can

materially affect the project’s estimated profitability.

Thus economic life is the life that maximizes the NPV and thus maximizes

shareholder wealth.

 Chart for Relevant & Irrelevant Outflows:

Irrelevant Cash
Relevant Cash Outflows
Outflows
* Variable labour * Fixed overhead
expenses expenses
* Variable material * Sunk costs
expenses
* Cost of the
investment
* Marginal taxes
 Determination of Relevant Cashflows:
* Single Proposal:
Cash Outflows of New Projects:
Particulars TK.
Cost of New Project ****
(+) Installation Cost of Plant & Equipments ****
( ± ) Working Capital requirements ****

Net Cash Outflow/Outlay (NCO) ****

# Determination of Cash Inflows:
Particulars Year
1 2 3 4……..
Sales Revenue
(-) Opening Cost
 Cash Flows (inflows) Before Tax (CFBT)
(-) Depreciation
Taxable Income (EBT)
(-) Tax
Earnings After Tax (EAT)
(+) Depreciation
Cash Flows After Tax (CFAT)
(+) Salvage Value (in N-th year)
(+) Recovery of Working Capital (in N-th year)
* Replacement Situation:
# Calculation of Incremental Cash Inflows:
Year 1 2 ….. N
Annual Cost Savings
(-) Working Capital Requirement (if any in year)
(-) Incremental Depreciation
Incremental Profit before tax
(-) Tax Payment
After Tax Profit
(+) Incremental Depreciation
Net Cash Benefit (NCB)
(+) Salvage Value (in N-th year, if any)
(+) Realized Working Capital (in N-th year)
# Calculation of Net Cash Outlay (NCO):
Particulars TK. TK.
Purchase &Installation Cost ****
(+) Working Capital ****
Total Cost/Investment **** ****
(-) Sales Value of Old Machine ****
(-) Tax Savings on Capital loss **** ****
Net cash outlay (NCO) ****
# Calculation of Depreciation Base of New Machine:
Particulars TK.
Acquisition & Installation Cost ****
(-) Sales Proceed of Existing Machine ****
Depreciation Base of New Machine ****
# Calculation of Incremental Depreciation:
Particulars TK.
Depreciation on New Machine ****
 (-) Depreciation on Old Machine ****
Incremental Depreciation ****
# Calculation of Annual Depreciation:
Cost of Asset − Salvage Value
Annual Depreciation = No . of Year
N.B. Working Capital is not considered in calculation of Annual Depreciation.
 Determination of Basis of Depreciation & Initial Investment/Net Cash
Outlay (NCO):
# Calculation of Basis of Depreciation:
Particulars TK.
Cost/Purchase price of New Machine ****
(+) Freight & Insurance ****
(+) Import Duty ****
(+) Dock dues & Clearing charges ****
(+) Railway fare & Carriage ****
(+) Removal cost of Old Machine ****
(+) Installation cost of New Machine ****
Basis of Depreciation ****
# Calculation of NCO:
Particulars TK.
Basis of Depreciation ****
(+) Working Capital introduced ****
NCO ****
 Pay Back Period (PBP)
* For Equal Cashflows:
NCO Here,
NCO = Net Cash
PBP = NCB /CFAT Outflow
NCB = Net Cash
Benefit

* For Unequal Cash flows:

NCO − C
A+ Here,
PBP = D A = The year in which the cumulative net cash
flow is nearer to NCO
C = The cumulative net cash flow of year-A
D = Net cash flow of the year following the year-A
 Pay Back Reciprocal (PBR)
1
× 100
PBP = PBP
 Average/Accounting Rate of Return (ARR)
Average EAT
× 100
ARR = Average Investment
# Calculation of Average Investment:
→ If only Initial Cost of Machine is given:
Initial Cost of Machine
Average Investment = 2
→ If Initial cost of Machine & Ending Investment are given:
Initial Cost of Machine + Ending Investment
Average Investment = 2
→ If Initial Cost of Machine & Salvage Value are given:
Initial Cost of Machine + Salvage Value
Average Investment = 2
→ If Initial Cost of Machine, Salvage Value & Working Capital are given:
Initial Cost of Machine + Salvage Value
Working Capital +
Average Investment = 2

 Return On Investment (ROI)

Average EAT
× 100
ROI = Initial Investment
Average EAT
× 100
= NCO
N.B. Here Initial Investment or NCO means Cost of Assets plus Working Capital

Discounted Cash flow Method

 Net Present Value (NPV)

[ A1

NPV = ( 1 + K )
1
+
A2
(1 + K ) 2
+ ⋯⋯+
An
(1 + K ) n ] −C Here,
A = NCB of year 1 to N
C = NCO
= PV of
NCB S - NCO K = Cost of Capital/
Discount
rate
 Internal Rate of Return (IRR)
C
A+ (B − A) Here,
IRR = C−D
A = Lower Discount Rate
B = Higher Discount Rate
C = NPV at LDR
D = NPV at HDR

 Profitability Index (PI)

PV ofNCB/CFAT
PI = PV of NCO

Problem.1.

Fin Corporation is planning to replace one of its exiting equipment. The book value

of the equipment is Tk. 1,50,000 and its net realized value is expected to be Tk.

20,000. Its annual operation expense is Tk. 65,000. A new and sophisticated

equipment is available at cost of Tk. 2,25,000. Its annual operating cost will be Tk.

33,000. After 5 years it can disposed of at Tk. 80,000 net at cost. The working
capital requirement will increase by Tk.10,000 if the existing equipment is replaced

by the new one. The cost of capital of the company is 15% and corporate tax rate

is 40%.

Using NVP method of evaluation, comment on whether FIN corporation will replace

the existing equipment or not?

Solution

i)Calculation of incremental depreciation :

Cost − S. V
Estimated life
Dep. of equipment =

1,50,000 − 20,000
5
=

= 26,000
 2,25,000 − 80, 000
5
Dep. of new equipment =

= 29,000

Incremental depreciation = 29,000 – 26,000

= 3,000

Calculation of incremental NCB :

Cost Savings (65,000 – 33,000) 32,000

Less. Incremental depreciation (3,000)

29,000
EBT

( 29,000 × 40% )
Less. Tax 11,600

17,400
EBT

3,000
Add. Depreciation
 20,400
CFAT / NCB

Calculation of NCO:

NCO = Cost of new Machine – Sale of old Machine+ Working capital

= 2, 25,000 – 1, 25,000

= 1, 00,000+10,000=1,10,000

Table for calculation of NPV:

Year CFAT DF 15% PV

1-5 20,400 3.3522 68,385

5(Sv+Wc) 90,000 0.497 44,730

Total 1,13,115

NPV = PV of CFAT – NCO

= 1,13,115 – 1,10,000 = 3,115

Decision: FIN Corporation replace the old machine because NPV is positive.

.2.
Problem
An Engineering company is considering an investment proposal to install new

equipment facility. The project will cost Tk. 50,000. The facility has a life

expectancy of 5 years and no salvage value. The company's tax rate is 40%. The

firm uses straight line method of depreciation. The estimate cash flows before tax

(CFBT) from the proposed investment proposal are as follows :—

Year CFBT (Taka)

1 10,000
2 15,000
3 14,000
4 15,000
5 20,000
You are required to compute the following :—
(i) Pay Back Period;

(ii) Average Rate of Return; (iii) Net Present Value at 10% discount rate;

(iv) Profitability Index at 10% discount rate.

Solution

Probability Statement

Dis.

CFAT Rat

Tax

Year CFBT Dep. EBT EAT (EAT + CCFAT e P.V

40%

Dep.) 10

1 10,00 10,00 - - - 10,000 10,000 .90 9090

 0 0 9

2 15,00 10,00 5,000 2,00 3,00 13,000 23,000 .82 1073

0 0 0 0 6 8

3 14,00 10,00 4,000 1,60 2,40 12,400 35,400 .75 9312

0 0 0 0 1

4(A) 15,00 10,00 5,000 2,00 3,00 13,000 48,400( .68 8879

0 0 0 0 C) 3

5 20,00 10,00 10,00 4,00 6,00 16,000( 64,400 .62 9936

0 0 0 0 0 D) 1

14,400 47,955

Cost − S. V
Estimated Life
W-1 Cal. of Dep. :

50,000 − 0
5
=
 = 10,000

NCO − C
D
Req (i) PBP = A + A=4
NCO = 50,000
C = 48,400
50,000 − 48,400 D = 16,000
16,000
=4+

= 4.1 Years

Average EAT
× 100
NCO + S . V
2
(ii) ARR (Average) : =

14 ,400 ÷ 5
× 100
50 ,000 + 0
2
=

2,880
× 100
25,000
=

= 11.52 %
(iii) NPV = PV of CFAT - NCO

= 47,955 – 50,000

= (2,045)

PV of Cash Inflow
PV of Cash Outflow
(iv) PI (at 10 %) =

47,955
× 100
50,000
= = 95.91 %

.3..
Problem

Each of two mutually exclusive projects involves an investment of Tk.1,20,000.

Each cash-flows from the two investments are as follows :—

Year Project M Project N

Taka Taka
1 70,000 10,000
2 40,000 20,000
3 30,000 30,000
4 10,000 50,000
5 10,000 80,000
(i) Compute ARR and payback period of each project.

(ii) Compute NPV and IRR of each project when the firm's cost of capital is 12

percent.

Which project would you select and why?

Solution
Project ‘M’

Profitability Statement

DF DF

Year CFAT CCFAT Dep. EAT P.V P.V

12 % 17 %

1 70,00 70,000 24,00 46,000 .893 62,510 .855 59,850

0 0

2 40,00 1,10,000 24,00 16,000 .797 31,880 .731 29,240

 0 0

3 30,00 1,40,000 24,00 6,000 .712 21,360 .624 18,720

0 0

4 10,000 1,50,000 24,00 (14,000) .636 6,360 .534 5,340

5 10,000 1,60,000 24,00 (14,000) .567 5,670 .456 4,560

40,000 1,27,780 1,17,710

Cost − S. V
Life
W-1 Cal. of Dep. =

1 ,20 ,000 − 0
5
=

= 24,000
 NCO − C
D A=2
1. PBP = A + NCO = 1,20,000
C = 1,10,000
D = 30,000
1,20,000 − 1,10,000
30,000
=2+

= 2.33 Year’s

Average EAT
× 100
NCO + S . V
2
3. ARR (Average) : =

40,000 ÷ 5
× 100
1,20,000 + 0
2
=

8 ,000
× 100
60,000
=

= 13.33 %

3. NPV = PV of CFAT - NCO

 = 1, 27,780 – 1, 20,000

= 7,780

C
× (B − A)
C−D
Here,
4. IRR = A + A = 12 %
B = 17 %
7 ,780 C = 1, 27,780 – 1, 20,000
× ( 17% − 12% ) = 7,780
7 ,780 −(2,290)
D = 1, 17,710 – 1, 20,000
= 12 % + = (2,290)

7 ,780
× 5%
10,070
= 12 % +

= 15.86 %

Project ‘N’

Profitability Statement
 Yea DF DF

CFAT CCFAT Dep. EAT P.V P.V

r 12 % 15 %

1 10,000 10,000 24,000 (14,000 .893 8,930 .855 8,700

2 20,000 30,000 24,000 (4,000) .797 15,940 .731 15,120

3 30,000 60,000 24,000 6,000 .712 21,360 .624 19,740

4 50,000 1,10,000 24,000 26,000 .636 31,800 .534 28,600

5 80,000 1,90,000 24,000 56,000 .567 45,360 .456 39760

70,000 1,23,390 1,11,920

Cost − S. V
Life
W-1 Cal. of Dep. =

1 ,20 ,000 − 0
5
=

= 24,000
 NCO − C
D
Here,
1. PBP = A + A=2
NCO = 1,20,000
1,20,000 − 1,10,000 C = 1,10,000
80,000 D = 80,000

=4+

= 4.13 Years

Average EAT
× 100
NCO + S . V
2
3. ARR (Average) : =

70,000 ÷ 5
× 100
1,20,000 + 0
2
=

14,000
× 100
60,000
=

= 23.33 %

3. NPV = PV of CFAT - NCO

 = 1, 23,390 – 1, 20,000

= 3,390

C
× (B − A)
C−D
Here,
4. IRR = A + A= Lower discount rate 12 %
B= Higher discount rate 15 %
3,390 C=NPV of lower discount rate 1,
× ( 15% − 12% ) 23,390 – 1,20,000=3,390
3,390 − (8 ,080)
D= NPV of higher discount rate
= 12 % +

3 ,390
× 3%
11,470
= 12 % +

= 12.88 %

Answer Table:

Project ‘M’ Project ‘N’

ARR 13.33 % 23.33 %

 PBP 2.33 Year’s 4.13 Year’s

NPV 27,780 23,390

IRR 16.62 % 12.88 %

Decision : From above calculation we see that the Project ‘N’ should be selected,

because ARR, NPV and IRR is higher than the Project ‘M’.

.4.
Problem

A company is considering investment proposals to install new milling controls at a

cost of Tk. 50,000. The facility has a life expectancy of 5 years and no salvage

value. The tax rate is 35%. Assume the firm uses straight line depreciation and the

same is allowed for tax purposes. The estimated cash flows before depreciation

and tax (CFBT.) from the investment proposals are follows :—

Year CFBT
1 10,000
2 10,692
3 12,769
4 13,462
5 20,385
 Compute the following :

Pay back period;

Average rate of return;

Internal rate of return;

Net present value at 10 per cent rate.

Solution

Profitability Statement

Yea CFBT Dep. EBT Tax EAT CFAT CCFA Dis. PV DF PV

r 35 (EAT+De T Rat 5%

% p.) e

10
 %

10,00 10,00 10,00 .90 9,09 .95 9,52

1 - - - 10,000

0 0 0 9 0 2 0

10,69 10,00 20,45 .82 8,63 .90 9,47

2 692 242 450 10,450

2 0 0 6 2 7 8

12,76 10,00 2,76 1,80 32,25 .75 8,86 .86 10,19

3 969 11,800

9 0 9 0 0 1 2 4 5

13,46 10,00 3,46 1,21 2,25 44,50 .68 8,36 .82 10,08

4 12,250

2 0 2 2 0 0 3 7 3 2

20,38 10,00 10,38 3,63 6,75 61,25 .62 10,40 .78 13,13

5 16,750

5 0 5 5 0 0 1 2 4 2

11,250
 52,407
45,353
Cost − S. V
Life
W-1 Cal.of Dep. =

50 ,000 − 0
5
=

= 10,000

NCO − C
D
Here,
Req: (a) PBP = A + A=4
NCO = 50,000
50,000 − 44 ,500 C = 44,500
16,750 D = 16,750

=4+

= 4.33 Year’s

Average EAT
× 100
NCO + S . V
2
(b) ARR (Average) : =
 11 ,250 ÷ 5
× 100
50 ,000 + 0
2
=

2,250
× 100
25,000
=

=9%

C
× (B − A)
C−D
(c) IRR = A + Here,
A= Lower discount rate 5%
B= Higher discount rate 10%
2,407
× ( 10 % − 5 % ) C=NPV of lower discount rate 52,407 –
2,407 − (4 ,647) 50,000=2,407
D= NPV of higher discount rate45,353
=5%+ – 50,000 = (4,647)

2,407
×5 %
7 ,054
=5%+

= 5 % + 1.71
 = 6.71 %

(d) NPV (at 10 % Dis. ) = PV of CFAT – NCO

= 45,353– 50,000

=(4,647)

.5.
Problem

RAXTORE Ltd. is considering an investment proposal to install new equipment

costing Tk. 60,000. The facility has life expectancy of five years and has no

salvage value. Assume that the company uses straight line depreciation. The tax

rate is 35 percent. The cash-flows before depreciation and tax (CFBTD) from the

investment are as follows: —

Year CFBTD
 1 10,000

2 12,000
3 15,000
4 20,000

5 25,000

Requirement:

(i) Pay back period; (ii) Average rate of return; (iii) Internal rate of return;

(iv)Net present value at 10% discount rate.

Solution

Profitability Statement

Yea CFBT Dep. EBT Tax EAT CFAT CCFA Dis PV Dis PV

r D 35% (EAT+De T . .
 Rat Rat

e e

p.)

10 15

% %

10,00 12,0 (2,00 (70 (1,30 1070 .90 9,72 .98 9,29

1 10,700

0 00 0) 0) 0) 0 9 6 0 8

12,00 12,0 2270 .82 9,91 .96 9,07

2 - - - 12,000

0 00 0 6 2 1 2

15,00 12,0 1,05 3665 .75 19,4 .94 9,17

3 3,000 1,950 13,950

0 00 0 0 1 76 2 9

4( 20,0 12,0 2,80 5,20 5385 .68 11,74 .92 9,83

8,000 17,200

A) 00 00 0 0 0 (C) 3 8 4 8
 25,0 12,0 13,00 4,55 8,45 20,450 7430 .62 12,6 .90 10,16

00 00 0 0 0 (D) 0 1 99 6 4

14, 4

63,561
Cost − S. V
300 3,561 (12,449)
Estimated life
w- 1 Calculation of Dep. =

60 ,000 − 0
5
=

= 12,000

Req: (i) Pay back Period(PBP): Here,

A=4
NCO − C NCO = 60,000
D C = 53,850
=A+

60,000 − 53,850
20,450
=4+
 = 4.30 Year’s

(ii) Average rate of return :

Average EAT
× 100
NCO + S . V
2
=

14 ,300 ÷ 5
× 100
60 ,000 + 0
2
=

2,860
× 100
30,000
=

= 9.533 %

(iii) Internal rate of return:

Here,
A= Lower discount rate 10%
C B= Higher discount rate 15%
× (B − A) C=NPV of lower discount rate 3,561
C−D
D= NPV of higher discount
IRR= A + rate(12,449)
 3,561
× ( 15% − 10% )
3,561 − (12,449)
= 10 % +

3,561
× 5%
16,010
= 10 % +

= 11.11%

(iv) Net Present Value

= PV of CFAT - NCO

= 63,561 – 60,000

= (3,561)

.6.
Problem
An Engineering company is Considering an investment proposal to install new

equipment facility. The project will cost $ 1,00,000. The facility has a life

expectancy of 5 years and no salvage value. The company's tax rate is 40%. The

firm uses straight line method of depreciation. The estimated gross cash inflow

from the proposed investment proposal are as follows :—

gross cash inflow

($)

1 20,000

2 30,000

3 28,000

4 30,000

5 40,000
You are required to compute the followings :—

Average rate of return.

Net present value at 10% discount rate.

Internal rate of return.

Profitability index at 10% discount rate.

Solution
Probability Statement

Dis.

CFAT Dis.

Rat

Yea Tax (EAT Rat

CFBT Dep. EBT EAT e PV P.V

r 40% + e

10

Dep.) 3%

%
1 20,00 20,00 - - - 20,00 .90 18,18 .97 19,420

0 0 0 9 0 1

2 30,00 20,00 10,00 4,00 6,000 26,00 .82 21,47 .94 24,518

0 0 0 0 0 6 6 3

3 28,00 20,00 8,000 3,20 4,800 24,00 .75 18,62 .91 22,692

0 0 0 0 1 5 5

4 30,00 20,00 10,00 4,00 6,000 26,00 .68 17,75 .88 23,088

0 0 0 0 0 3 8 8

5 40,00 20,00 20,00 8,00 12,00 32,00 .62 19,87 .86 27,616

0 0 0 0 0 0 1 2 3

28,800
95,910 1,17,33

1,00,000 4
 (4 ,090
1,00,00
)

17,334

Cost − S. V
Life
W-1 Cal. of Dep. :

1,00,000 − 0
5
=

= 20,000

Average EAT
× 100
NCO + S . V
2
Req: (i) ARR (Average) : =

28,800 ÷ 5
× 100
1 ,00,000 + 0
2
=

5 ,760
× 100
50,000
=
 = 11.52 %

(ii) NPV (10 % dist.) = PV of CFAT - NCO

= 95,910 – 1,00,000

= (4,090)
 C
× (B − A)
C−D Here,
A= Lower discount rate 3%
(iii) IRR = A + B= Higher discount rate 10%
17,334 C=NPV of lower discount rate
× ( 10% − 3%)
17,334 − ( 4,090) 17,334
D= NPV of higher discount
=3%+ rate(4,090)

17,334
× 7%
21,424
=3%+

= 8.66 %

PV of Cash Inflow
PV of Cash Outflow
(iv) PI (at 10 % dis.) =

95,910
× 100
1,00,000
=

= 95.91 %

.7.
Problem
A company is considering the purchase of a new machine that cost Tk. 60,000. The

company uses straight line method of depreciation. The annual cash flows have the

following projections:

Year Cash flow

1 21,000

2 29,000

3 36,000

4 16,000

5 12,000

(i) If the cost of capital is 10%, what is the net present value?

(ii) What is the internal rate of return?

(iii) Should the project be accepted? Why?

(iv) If the reinvestment assumption of IRR method is used, what will be the total

value of inflows after five year assuming 14% is the IRR?

 Solution
Profitability Statement

Dis. Rate Dis. Rate

Year CFAT PV PV

10 % 30 %

1 21,000 .909 19,089 .769 16,149

2 29,000 .826 23,954 .592 17,168

3 36,000 .751 27,036 .455 16,380

4 16,000 .683 10,928 .350 5,600

5 12,000 .621 7,452 .269 3,228

88,459
58,525

60,000
60,000

28,459 (1,475)

(i) NPV = PV of CFAT - NCO

 = 88,459 – 60,000

= 28,459

(ii) For IRR calculation discount rate take as 10 % and 30 %

C
× (B − A)
C−D Here,
A= Lower discount rate 10%
IRR = A +
B= Higher discount rate 30%
C=NPV of lower discount rate
28,459 28,459
× (30% − 10% )
28,459 − (1,475) D= NPV of higher discount
rate(1,475)
= 10 % +

28,459
× 20%
29,934
= 10 % +

= 29.014 %

(iii) Here consideration of NPV. The project should be accepted because NPV is

positive.
 .8.
Problem

BD Enterprise is considering a new product line. The details of the investment

proposals are as follows:-

Initial cash outlay Tk. 1,00,000

Expected life 5 years

Residual value Tk. 10,000

Working capital Tk. 20,000

Cash-flow before depreciation and taxes:

 Year CFBT

(Tk.)

1 25,000

2 30,000

3 32,000

4 35,000

5 40,000

The project’s cost of capital is 10% and tax rate 45%. Depreciation will be on

straight line basis.You are required to calculate and comment on whether the

project should be accept or not:

(i) Average Rate of Return(ARR)

(ii) Net Present value(NPV)

(iii) Internal Rate of Return(IRR) and

 (iv) Profitable Index(PI)

Solution

Profitability Statement

Year CFBT Dep. EBT Tax EAT CEAT Dis PV Dis PV

45% (EAT+D . .

ep) Rat Rat

e e
 10 5%

1 25,0 18,0 7,00 3,15 3,85 21,850 .90 19,86 .95 20,801

00 00 0 0 0 9 2 2

2 30,0 18,0 12,00 5,4 6,60 24,600 .82 20,32 .90 22,312

00 00 0 00 0 6 0 7

3 32,0 18,0 14,00 6,3 7,70 25,700 .75 19,30 .86 22,20

00 00 0 00 0 1 0 4 5

4 35,0 18,0 17,00 7,6 9,35 27,350 .68 18,68 .82 22,50

00 00 0 50 0 3 0 3 9

5 40,0 18,0 22,0 9,9 12,10 30,100 .62 18,69 .78 23,56

00 00 00 00 0 1 2 3 8

5(s.v+ 30,0 - - - - 30,000 .62 18,63 .78 23,49

wc) 00 1 0 3 0

Total 39,6 1,15,4 1,34,8

00 84 85

Working-1

Cost−salvage value
Estimated life
Calculation of Depreciation=

1,00, 000−10,000
5
=

= 18,000

Working-2

Calculation of NCO:

Initial outlay = 1,00,000

Add. Working capital= 20,000

 1,20,000

Average EAT
Average investment
Req.(i)ARR(Average)=

39,600÷5
x100
75,000
=

= 10.56%

Initial investment +S .V
2
Average investment = W.C +

1 , 00 ,000+10 ,000
2
= 20,000+

= 75,000

Req(ii) NPV= PV of CFAT-NCO

= 1,15,484- 1,20,000
 = (4,516)

C
×(B− A )
C−D
Req(iii) IRR=A+

14,885
×(10 %−5 %)
14 ,885−(4 ,516 )
=5%+

= 8.836%

PV of cash in flow
PV of cash out flow
Req(iv) PI=

1,15,484
1,20,000
=

= 96.236%

Decision: Consideration of NVP the project should not be accepted, because NPV is
A= Lower discount rate 5%
B= Higher discount rate 10%
C=NPV of lower discount rate=
negative. 1,34,885 -1,20,000= 14,885
D= NPV of higher discount rate=
1,15,484- 1,20,000 = (4,516)
 .9.
Problem

If present value of future cash inflow of a project is equal to its present value of

cash flows at 10% cost of capital, what is the project's NPV and PI?

(i) NPV= PV of future cash inflow- PV of cash outflows

=0

PV of Cash inf lows

=1
PV of Cash Outflows
BBA-2013
ii) PI=

.10.
Problem

A manufacturer has a proposal for production of high quality product. The cost of

the necessary equipment to produce the product is Tk 80000. The equipment would

last for 5 years Tk 10000 salvage value. The product can be sold at Tk 5 each.

Regardless of the level of Production, the manufacturer will incur cash of Tk

30000 each year if the project is undertaken. The variable cost is estimated at Tk

2.5 per unit. The manufacturer estimates that it will sell about 75000 units per

year. The straight line depreciation method will be used. The corporate tax rate is

30% and the cost of capital of the firm is 12%.

Required: Should the proposed equipment be purchased under IRR rules?

Solution

(b) Table for calculation of IRR:

Year Sales Total Dep. EBT Tax EAR CFAT Dis. PV Dis. PV

cost 30% (EAT+Dep rate rate

(FC+VC) .) 12% 145

1-5 3,75,00 2,17,50 14,00 1,43,50 43,05 1,0045 1,14,450 3.60 4,12,59 .679 77,712
 0 0 0 0 0 0 5 2

5(SV 10,000 -------- ------ ------- ------ ------ 10,000 .567 5,670 .011 110

) - ----

4,18,26 77,822

(80,000 (80,000)

3,38,26 (2,178)

Decision: Proposed equipment should be purchased, because IRR rate is higher than

cost of capital.

.11.
Problem
A manufacturing company is considering an investment proposal to install a new

machine facility. The project will cost Tk. 85,000. The 'facility has a life

expectancy of 4 years and no salvage value. The company's tax rate is 35% and

cost of capital is 8%. The company uses straight line depreciation method. The

estimated gross cash inflows from the investment proposal are as follows :—

Year Gross Cash Inflow (Tk.)

1 25,000

2 35,000

3 28,000

4 60,000

You are required to calculate :—

(i)Average Rate of Return;

(ii) Net Present Value;

(iii)Internal Rate of Return;

(iv) MIRR.

Solution

Probability Statement

Yea CFBT Dep. EBT Tax EAT CFAT Dis. PV Dis. P.V
 Rat Rat

(EAT

e e

r 35% +

8% 16

Dep.)

1 25,00 21,25 3,750 1,313 2,437 23,68 .92 21,934 .86 20,41

0 0 7 6 2 8

2 35,00 21,25 13,75 4,813 8,937 30,18 .85 25,870 .74 22,42

0 0 0 7 7 3 9

3 28,00 21,25 6,750 2,363 4,387 25,63 .79 20,356 .64 16,43

0 0 7 4 1 3

4 60,00 21,25 38,75 13,56 25,18 46,43 .73 34,131 .55 25,63

0 0 0 3 7 7 5 2 3
Tot 40,94 1,02,2 84,91

al 8 91 3

Less, NCO - -

85,000 85,00

NPV 17,291 (87)

Working-1

Cost−salvage value
Estimated life
Calculation of Depreciation=

85 , 000−000
4
=

= 21,250
 Average EAT
× 100
NCO + S . V
2
Req: (i) ARR (Average) : =

40,948 ÷ 4
× 100
85,000 + 0
2
=

10,237
× 100
42,500
=

= 24.08%

(ii) NPV (8% dist.) = Total PV - NCO

= 1,02,291– 85,000

= 17,291
 C
× (B − A)
C−D
(iii) IRR = A +

17,291 Here,
× ( 16 % − 8% )
17,291 − (87) A= Lower discount rate 8%
B= Higher discount rate 16%
= 8% + C=NPV of lower discount rate 17,291
D= NPV of higher discount rate(87)
17,291
× 8%
17,378
= 8% +

= 15.96%

n
√ FV
PV of Cost
−1

(iv) MIRR=

4
√ 1,39,174
85,000
−1

=
 ∑ CIF t (1+r)n−1
FV=

23 , 687(1+. 08)4−1 +30 ,187(1+. 08)3−1 +25 , 637(1+. 08)2−1 +46 , 437(1+. 08)1−1
=

= 1,39,174
 Questions

Suggested Questions

3.1.Define capital Budgeting. (2006,2014)

3.2.Which of the capital budgeting techniques is the best and why?/

Which of the net present value method and internal rate of return method is

superior and why? (2005, 2006,2009)

3.3.Why are capital budgeting so important? (2005)

3.4.Under what circumstances do the net present value and internal rate of return

methods differ? What method would you prefer and why? (2007,2014)
3.5.What are the significance of capital budgeting?(2014)

3.6. Describe the features/Importance/Objective/Advantage of Capital Budgeting

3.7.Explain the techniques/Methods of Capital Budgeting.

3.8.What is multiple IRR? Distinguish between multiple IRR and modified IRR.

(2007)

3.9.What are the capital budget process?

3.10.Describe the Categories of Capital Budgeting Projects

Exercises

Exercise :1
Tanjim Company is thinking of investing in a new project. A machine costing

Tk.50,000 has to be procured to implement this project. The estimated life of this

machine would be 5 years having no salvage value. The tax rate of that company is

55% and does not get any investment allowance. The company charges depreciation

on straight line basis. Cash flow before tax (CFBT) would be as follows:

At the end of Year

CFBT

Tk.
1st

10,000
2nd

3rd

4th
5th

You are required to calculate: 1.

1. Pay Back Period;

2. ARR (On average rate of return)

3. Net present value

4. PV. PBP

5. P.I

6. NPI at lO% Discount Rate.

Exercise 02:

Maximum company details of the investment proposals of company are given

bellow.
Details Amount

Initial cash outlay Tk. 10,000

Expected life 5 years

Scrap value Nil

Cash flows after tax (CFAT

Year Tk.

1 6,000

2 3,000

3 2,000

4 5,000

5 5,000
The Company's cost of capital is 10% and pays tax at 50% rate. The project will be

depreciated on a straight line basis.

1. Pay-back period;

2. The rate of return on Original investment.

3. The rate of return on Average Investment.

4. Net present value.

5. Present value PBP.

Exercise 03:

Asad Ltd. is considering the purchase of a new machine at a cost of Tk. 4, 00,000.

The machine w| have an expected 7 year life and at the end of its salvage value will

be Tk. 15,000. The machine will req. an additional working capital of Tk. 1,00,000.
The company employs straight line method for charge depreciation. The net pre-

tax cash flows are as follows : -

Year Cash flows

1 1,00,000

2 1,00,000

3 1,40,000

4 1,30,000

5 1,10,000

6 1,20,000

7 1,00,000
The target return on capital of the company is 15% and using that rate determine

the Net Present Value & profitability index of the machine. Assume a 50% tax

rate.

Exercise 04:

Brothers Ltd is considering a proposal to install! a new machine. The project will

cost Tk. 100,000 and expected life is five year. The estimated cash-inflows before

tax (CFBT) of the project are as follows.

Year CFBT

1 25,000

2 30,000
3 35,000

4 40,000

5 45,000

The tax-rate of that company is 50% and charges depreciation on straight line

basis.

PBP

ARR

ROI

PER

NPV at 10% discount rate

Profitability index at 10% discount rate.

Net profitability Index (NPI).

IRR

Exercise 06:

Two projected have projected cash flows as follows:

Period A B

0 -20,000 -20,000

1 10,000 0

2 10,000 0

3 10,000 0

4 10,000 50,000
IRR

NPV at 15%

Which project should be selected?

Exercise 07:

Brothers Ltd is considering a proposal to install! a new machine. The project will

cost Tk. 100,000 and expected life is five year. The estimated cash-inflows before

tax (CFBT) of the

project are as follows.

Year CFBT

1 25,000
2 30,000

3 35,000

4 40,000

5 45,000

The tax-rate of that company is 50% and charges depriciation on straight line

basis.

PBP

ARR

ROI

NPV at 10% discount rate

Profitibility index at 10% discount rate.

Net profitibility Index (NPI).

IRR
Exercise 08:

The Enginneering co. Ltd. Is considering to purchase two Modern Automrtic

machine “A” & “B” to be used in its factory. Particulars of the two machines are

given below:

Machine A Machine B

Original cost 1,50,000 2,00,000

Economic life 8 years 8 years

Annual cash saving Tk. 30,000 Tk.50,000

Scrap at end Tk. 70,000 Tk. 80,000

Requried:
1.PBP

2. ARR

3. NPV

4. Which machine is more acceptable.

Present value Tables