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Calculaiton of PI Index AT 10%

This document compares two projects, Project X and Project Y, over a 5 year period. It calculates the net present value, profitability index, discounted payback period, and internal rate of return for each project using discount rates of 10%, 20%, and 29%. Project X has a higher net present value, profitability index, and internal rate of return compared to Project Y. The discounted payback period for Project X is 3 years while it is 2 years for Project Y.

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shivani
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56 views4 pages

Calculaiton of PI Index AT 10%

This document compares two projects, Project X and Project Y, over a 5 year period. It calculates the net present value, profitability index, discounted payback period, and internal rate of return for each project using discount rates of 10%, 20%, and 29%. Project X has a higher net present value, profitability index, and internal rate of return compared to Project Y. The discounted payback period for Project X is 3 years while it is 2 years for Project Y.

Uploaded by

shivani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Year Project X Project Y

20% 10% 9% 15%


0.833 0.909 0.917 0.87
0,694 0.826 0.842 0.75
0.579 0.751 0.772 0.658
0.483 0.683 0.708 0.572
0.402 0.621 0.645 0.497

CALCULAITON OF NPV AT 10%


Year Project X PV factor @10% PV of Project X PV of Project Y Project Y DCCIF X
DCCIFY
CIF CIF
CIF PV factor @10% PV Of CIF for Multiply PV
X factor @10%
with Inflows of PV CIF for Y
Investm -100000 Project Y-100000 -100000
ent 1 -100000 Payback Period
Cash 20,000 45,000 40,909
Inflows
1st Year
0.9090909091 18181.81818 18182 40909 PBP Year of Max recovery Balance to be recovered
30,000 40,000 33,058
2nd
Year 0.826446281 24793.38843 42975 73967 Cash inflow of the year of last recovery
40,000 30,000 22,539
3rd Year 0.7513148009 30052.59204 73028 96506 Project X
50,000 10,000 6,830
4th Year 0.6830134554 34150.67277 107178 103337 3 10000
60,000 8,000 4,967
5th Year 0.6209213231 37255.27938 144434 108304 50000
Present value of CIF
Total 144433.7508 108,304 3.2

Net Present value 44433.7508 8,304 Project Y


2.00 15000
30000
2.50

rate=.10 Discounted Payback Period


column= select all the CIF and put in bracket
after bracket +CIF Project X
3 26972
34150.67277
Sum of Cash inflows
Initial Investment 3.7898
Calculaiton of PI Index AT 10% 0 Project Y
X 144433.7508 1.444337508 3 3494
100000 6,830

Y 3.5115
108303.89 1.083038913
100000

CALCULATION OF IRR

Year Project X PV factor @20% PV factor PV of Project X PV of Project X


CIF @29%
Take the rates Multiply PV Multiply PV factor @29%
given factor @20% with Inflows of Project X
Multiply PV factor @29% with Inflows of Project X
with Inflows of
Project X
Investm -100000
ent 1 1 -100000 -100000 -100000
Cash 20,000 0.833 0.775
Inflows
1st Year 16660 15500 15500
30,000 0.694 0.601
2nd
Year 20820 18030 18030
40,000 0.579 0.466
3rd Year 23160 18640 18640
50,000 0.483 0.361
4th Year 24150 18050 18050
60,000 0.402 0.283
5th Year 24120 16980 16980
Present value of CIF
Total 108910 87200 87200
Net Present value 8910 -12800 -12800
LR 20
Step: 2: Use the formula for calculation of IRR HR 29

IRR= LR+ PVLR – O (HR-LR) PVLR- O 8910

PVLR – PVHR PVLR-PVHR 21710

HR-LR 9

IRR 23.69368954

IRR 23%

Year Project Y PV factor @9% PV factor PV of Project Y


CIF @15%
Take the rates Multiply PV Multiply PV factor @15% Multiply PV
given factor @9% with Inflows of Project Y factor @15%
with Inflows of with Inflows of
Project Y Project Y
Investm -100000
ent 1 1 -100000 -100000 -100000
Cash 45,000
Inflows
1st Year 0.917 0.87 41265 39150 39150
40,000
2nd
Year 0.842 0.75 33680 30000 30000
30,000
3rd
Year 0.772 0.658 23160 19740 19740
10,000
4th
Year 0.708 0.572 7080 5720 5720
8,000
5th
Year 0.645 0.497 5160 3976 3976
Present value of CIF 98586
Total 110345 98586
Net Present value 10345 -1414

Step: 2: Use the formula for calculation of IRR

IRR= LR+ PVLR – O (HR-LR) 9 10345 (15-9)

PVLR – PVHR 11759

0.8797516796 6
LR 9 20
HR 15 29
PVLR- O 10345 -100000
PVLR-PVHR 11759 -10345
HR-LR 6
IRR 14.27851008 9
CIF CCIF
0 -1000000
1 200000 200000 0.909 181800
2 100000 300000 0.826 82600
3 150000 450000 0.751 112650
4 250000 700000 0.683 170750
5 125000 825000 0.621 77625
6 155000 980000 0.565 87575
7 200000 1180000 0.513 102600
8 225000 1405000 0.467 105075
PBP 6 0.1 920675
79,382.20 6.1
-7938219.7372079400% $920,617.80) ($79,382.20)
Calculate ARR A B
Cost 50000 75000
Estimated Life 5 5 Years
PBDT 100000
Estimated Profit After Tax Less D 10000
1 4500 12500 PBT 90000
2 5000 10000 Less Tax 45000
3 8750 3000 PAT 45000
4 9000 7500
5 10000 6250 Cash Flows PAT D
Total Profits 37250 39250 45000 10000
5 5 55000
Average Profits After Tax 7450 7850

Average Investments 50000/2 75000/2


25000 37500

Accounting Rate of Return Average Profits After Tax


Average Investments

ARR 29.8 20.93333333

If scrap value of the asset is given


Original Investment is also called = Total Investment

OR
Average Investment = Original Investment- Scrap Value
2

If Working Capital is Given


Original Investment + Working Capital
2

If additional working capital and scrap value are given


Average Investment =
Original Investment –Scrap Value + Additional Working Capital + Scrap Value
2

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