Syed Uzair Mehboob 7035 Assignment 2

Information

Years Sales VC each year/unit

1 13,000 Total Fixed Cost Each Year
2 15,000 Net working capital at start
3 16,000 Initial Cost Equipment
4 16,500 Depreciation Method
5 16,000 Salvage Value
6 15,000 Tax Rate
7 14,000 RRR
8 13,000

(A) Year Units Unit Price Total Sales

0
1 13,000 90 1,170,000
2 15,000 90 1,350,000
3 16,000 90 1,440,000
4 16,500 90 1,485,000
5 16,000 90 1,440,000
6 15,000 90 1,350,000
7 14,000 90 1,260,000
8 13,000 90 1,170,000

(B)
(C)
Year Units Change in Unit Unit Price Total Sales
0
1 13,000 90 1,170,000
2 15,000 90 1,350,000
3 16,000 90 1,440,000
4 16,500 90 1,485,000
5 17,600 1600 90 1,584,000
6 16,500 1500 90 1,485,000
7 15,400 1400 90 1,386,000
8 14,300 1300 90 1,287,000

10% Downside from year 4

Year Units Unit Price Total Sales VC / unit

0
1 13,000 90 1,170,000 55
2 15,000 90 1,350,000 55
3 16,000 90 1,440,000 55
4 16,500 90 1,485,000 55
5 14,400 90 1,296,000 55
6 13,500 90 1,215,000 55
7 12,600 90 1,134,000 55
 8 11,700 90 1,053,000 55

(D)

Year Units Unit Price Total Sales VC/Sale Total VC

0
1 14300 90 1,287,000 60.5 865,150
2 16500 90 1,485,000 60.5 998,250
3 17600 90 1,584,000 60.5 1,064,800
4 18150 90 1,633,500 60.5 1,098,075
5 17600 90 1,584,000 60.5 1,064,800
6 16500 90 1,485,000 60.5 998,250
7 15400 90 1,386,000 60.5 931,700
8 14300 90 1,287,000 60.5 865,150
10% Downside
Year Units Unit Price Total Sales VC/Sale Total VC
0
1 11700 90 1,053,000 49.5 579,150
2 13500 90 1,215,000 49.5 668,250
3 14400 90 1,296,000 49.5 712,800
4 14850 90 1,336,500 49.5 735,075
5 14400 90 1,296,000 49.5 712,800
6 13500 90 1,215,000 49.5 668,250
7 12600 90 1,134,000 49.5 623,700
8 11700 90 1,053,000 49.5 579,150
 $55 Depriciation
$35,000 S/L cost/U.L
$15,000 Cost $1,100,000
$1,100,000 U.L 8
Straight Line 137500
10000
0.34
0.2

VC / unit Total VC FC Depr EBIT Taxes

55 715,000 35000 137500 282,500 96,050

55 825,000 35000 137500 352,500 119,850
55 880,000 35000 137500 387,500 131,750
55 907,500 35000 137500 405,000 137,700
55 880,000 35000 137500 387,500 131,750
55 825,000 35000 137500 352,500 119,850
55 770,000 35000 137500 317,500 107,950
55 715,000 35000 137500 282,500 96,050

NPV Calculations

Year Formula (Fv/1+r) Yearly NPV

1 323950/1+0.2 269958.333333333
2 370150/(1+0.2)^2 257048.611111111
3 393250/(1+0.2)^3 227575.231481482
4 404800/(1+0.2)^4 195216.049382716
5 393250/(1+0.2)^5 158038.355195473
6 370150/(1+02)^6 123962.486068244
7 347050/(1+0.2)^7 96855.2856724394
 8 323950/(1+0.2)^8 81154.6173351528
Sum of NPV 1409808.96957995
NPV 1409809
ICO 1115000
Final NPV 294,809.00

VC / unit Total VC FC Depr EBIT Taxes

55 715,000 35000 137500 282,500 96,050.00

55 825,000 35000 137500 352,500 119,850.00
55 880,000 35000 137500 387,500 131,750.00
55 907,500 35000 137500 405,000 137,700.00
55 968,000 35000 137500 443,500 150,790.00
55 907,500 35000 137500 405,000 137,700.00
55 847,000 35000 137500 366,500 124,610.00
55 786,500 35000 137500 328,000 111,520.00

Year Formula (Fv/1+r) Yearly NPV

1 323950/1+0.2 269958.333333333
2 370150/(1+0.2)^2 257048.611111111
3 393250/(1+0.2)^3 227575.231481482
4 404800/(1+0.2)^4 195216.049382716
5 430210/(1+0.2)^5 172891.750257202
6 404800/(1+02)^6 135566.70096022
7 379390/(1+0.2)^7 105880.786143976
8 353980/(1+0.2)^8 82324.4345731405
Sum of NPV 1446461.89724318
ICO 1115000
Final NPV 331461.9

Total VC FC Depr EBIT Taxes NI

715,000 35000 137500 282,500 96,050.00 186,450.00

825,000 35000 137500 352,500 119,850.00 232,650.00
880,000 35000 137500 387,500 131,750.00 255,750.00
907,500 35000 137500 405,000 137,700.00 267,300.00
792,000 35000 137500 331,500 112,710.00 218,790.00
742,500 35000 137500 300,000 102,000.00 198,000.00
693,000 35000 137500 268,500 91,290.00 177,210.00
 643,500 35000 137500 237,000 80,580.00 156,420.00

Year Formula (Fv/1+r) Yearly NPV

1 323950/1+0.2 269958.3
2 370150/(1+0.2)^2 257048.6
3 393250/(1+0.2)^3 227575.2
4 404800/(1+0.2)^4 195216.0
5 356290/(1+0.2)^5 143185.0
6 335500/(1+02)^6 112358.3
7 314710/(1+0.2)^7 87829.8
8 318920/(1+0.2)^8 74170.6
Sum of NPV 1367341.8
ICO 1115000
NPV 252341.8

FC Depr EBIT Taxes NI Add;Dep

35000 137500 249,350 84,779.00 164,571.00 137500

35000 137500 314,250 106,845.00 207,405.00 137500
35000 137500 346,700 117,878.00 228,822.00 137500
35000 137500 362,925 123,394.50 239,530.50 137500
35000 137500 346,700 117,878.00 228,822.00 137500
35000 137500 314,250 106,845.00 207,405.00 137500
35000 137500 281,800 95,812.00 185,988.00 137500
35000 137500 249,350 84,779.00 164,571.00 137500

Year Formula (Fv/1+r) Yearly NPV

1 302071/1+0.2 251725.83333333
2 344905/(1+0.2)^2 239517.36111111
3 366322/(1+0.2)^3 211991.89814815
4 377030/(1+0.2)^4 181823.88117284
5 366322/(1+0.2)^5 147216.59593621
 6 344905/(1+02)^6 115507.98664695
7 323488/(1+0.2)^7 90279.56390032
8 302071/(1+0.2)^8 70252.060217931
Sum of NPV 1308315.1804668
ICO 1115000
NPV 193315.18046684

FC Depr EBIT Taxes NI Add;Dep

35000 137500 301,350 102,459.00 198,891.00 137500

35000 137500 374,250 127,245.00 247,005.00 137500
35000 137500 410,700 139,638.00 271,062.00 137500
35000 137500 428,925 145,834.50 283,090.50 137500
35000 137500 410,700 139,638.00 271,062.00 137500
35000 137500 374,250 127,245.00 247,005.00 137500
35000 137500 337,800 114,852.00 222,948.00 137500
35000 137500 301,350 102,459.00 198,891.00 137500

Year Formula (Fv/1+r) Yearly NPV

1 336391/(1+0.2) 280325.833333333
2 384505/(1+0.2)^2 267017.361111111
3 408562/(1+0.2)^3 236436.342592593
4 420590/(1+0.2)^4 202830.825617284
5 408562/(1+0.2)^5 164191.904578189
6 384505/(1+02)^6 128769.946523491
7 360448/(1+0.2)^7 100594.421582076
8 336391/(1+0.2)^8 78233.7953288133
Sum of NPV 1458400.43066689
ICO 1115000
NPV 343400.430666891
NI Add;Dep ICO Salvage Value NWC Adjusted OCF

186,450 137500 323,950 0 0 0

232,650 137500 370,150 0 0 0
255,750 137500 393,250 0 0 0
267,300 137500 404,800 0 0 0
255,750 137500 393,250 0 0 0
232,650 137500 370,150 0 0 0
209,550 137500 347,050 0 0 0
186,450 137500 323,950 10000 15000 348,950
NI Add;Dep ICO Salvage Value NWC Adjusted OCF

186,450.00 137500 323,950.00 0 0 0

232,650.00 137500 370,150.00 0 0 0
255,750.00 137500 393,250.00 0 0 0
267,300.00 137500 404,800.00 0 0 0
292,710.00 137500 430,210.00 0 0 0
267,300.00 137500 404,800.00 0 0 0
241,890.00 137500 379,390.00 0 0 0
216,480.00 137500 353,980.00 10000 15000 378,980.00

Add;Dep ICO Salvage Value NWC Adjusted OCF

137500 323,950.00 0 0 0
137500 370,150.00 0 0 0
137500 393,250.00 0 0 0
137500 404,800.00 0 0 0
137500 356,290.00 0 0 0
137500 335,500.00 0 0 0
137500 314,710.00 0 0 0
 137500 293,920.00 10000 15000 318,920.00

ICO Salvage Value NWC Adjusted OCF

302,071.00 0 0 0
344,905.00 0 0 0
366,322.00 0 0 0
377,030.50 0 0 0
366,322.00 0 0 0
344,905.00 0 0 0
323,488.00 0 0 0
302,071.00 10000 15000 327,071.00
ICO Salvage Value NWC Adjusted OCF

336,391.00 0 0 0
384,505.00 0 0 0
408,562.00 0 0 0
420,590.50 0 0 0
408,562.00 0 0 0
384,505.00 0 0 0
360,448.00 0 0 0
336,391.00 10000 15000 361,391.00