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Cash Flow Estimation: Given Data

The document presents revenue, cost, and cash flow projections for a business over 5 years. It shows that in the first 3 years, the business is expected to have a net present value of $47,934 with 5% annual sales growth and cost of goods sold being 60% of sales. A sensitivity analysis finds that the NPV is most sensitive to changes in the cost of goods sold percentage.

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Md. Din Islam Asif
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© Attribution Non-Commercial (BY-NC)
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Download as XLS, PDF, TXT or read online on Scribd
288 views

Cash Flow Estimation: Given Data

The document presents revenue, cost, and cash flow projections for a business over 5 years. It shows that in the first 3 years, the business is expected to have a net present value of $47,934 with 5% annual sales growth and cost of goods sold being 60% of sales. A sensitivity analysis finds that the NPV is most sensitive to changes in the cost of goods sold percentage.

Uploaded by

Md. Din Islam Asif
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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Given Data

1st year 2nd year 3rd year


sales revenue $300,000 $315,000 $330,750
sales growth 0.05 0.05 0.05
cost of good sold (of sales) 0.6 0.6 0.6
advertising $30,000 $31,500 $33,075
tax rate 0.3 0.3 0.3
market rate 0.14 0.14 0.14
lease payment $25,000 $25,000 $25,000

Cash Flow Estimation


0th year 1st year 2nd year 3rd year
Operating activities:
Revenue $300,000 $315,000 $330,750
Cost of Good Sold ($180,000) ($189,000) ($198,450)
Gross Profit $120,000 $126,000 $132,300

Operating Expenses:
Advertising ($30,000) ($31,500) ($33,075)
Depreciations:
Equipment ($11,000) ($11,000) ($11,000)
Furniture & Fittings ($17,000) ($17,000) ($17,000)
Income From Operation $62,000 $66,500 $71,225

Non-operating Activities:
Lease Payment ($25,000) ($25,000) ($25,000)
Income Before Tax $37,000 $41,500 $46,225
Tax ($11,100) ($12,450) ($13,868)
Net Income $25,900 $29,050 $32,358
Add Back Depreciations:
Equipment $11,000 $11,000 $11,000
Furniture & Fittings $17,000 $17,000 $17,000
Sales of Assets
Equipment
Furniture & Fittings
Purchase of Assets
Equipment ($75,000)
Furniture & Fittings ($100,000)
Net Estimated Cash Flow ($175,000) $53,900 $57,050 $60,358

PV of CFs ($175,000) $47,281 $43,898 $40,740


NPV $47,934.41
Sensitivity of NPV (Data Table)
Sales Growth
Net Present Value $47,934.41 (0.05) 0.00

Cost of Good Sold/Sales


0.40 $61,826.12 $73,301.32
0.45 $52,615.59 $64,090.79
0.50 $43,405.07 $54,880.26
0.55 $34,194.54 $45,669.74
0.60 $24,984.01 $36,459.21
0.65 $15,773.49 $27,248.69
0.70 $6,562.96 $18,038.16
0.75 ($2,647.57) $8,827.63
4th year 5th year
$347,288 $364,652
0.05 0.05
0.6 0.6
$34,729 $36,465
0.3 0.3
0.14 0.14
$25,000 $25,000

4th year 5th year

$347,288 $364,652
($208,373) ($218,791)
$138,915 $145,861

($34,729) ($36,465)

($11,000) ($11,000)
($17,000) ($17,000)
$76,186 $81,396

($25,000) ($25,000)
$51,186 $56,396
($15,356) ($16,919)
$35,830 $39,477

$11,000 $11,000
$17,000 $17,000

$20,000
$15,000

$63,830 $102,477

$37,793 $53,223
Data Table)
Sales Growth Rate
0.05 0.10 0.15
$84,776.52 $96,251.72 $107,726.91
$75,565.99 $87,041.19 $98,516.39
$66,355.46 $77,830.66 $89,305.86
$57,144.94 $68,620.14 $80,095.34
$47,934.41 $59,409.61 $70,884.81
$38,723.88 $50,199.08 $61,674.28
$29,513.36 $40,988.56 $52,463.76
$20,302.83 $31,778.03 $43,253.23

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