a ₹ 991.

74
₹ 8.26

20000
5000 ₹ 4,629.63
10000 ₹ 8,573.39
15000 ₹ 11,907.48
11000 ₹ 8,085.33
₹ 33,195.83
profit = ₹ 13,195.83

Accept the project

NPV ₹ 33,195.83 NPV formula asumes that the first cash flow occurrs as the end of the period.
NPV ₹ 13,195.83
 Period CF 30000
1 10000 10000
2 16000 26000
3 9000 35000
assuming that the cashflow do not arrive at the end of the year but lineraly arrive througout the year
Fraction = 0.444444 0.444444
PB 2.444444 we will get the rest 4000 between 2 and 3 year

Discounted Payback Period

Period CF Cum CF DCF Cum DCF
0 2000
1 800 800 727.2727 727.2727
2 900 1700 743.8017 1471.074
3 2000 3700 1502.63 2973.704
Frac 0.15 Frac 0.352
PB 2.15 DPB 2.352
of the period.
ve througout the year
 1000
10%
1150

1045.45454545455

1000

Q
0 -100
1 40
2 50
3 70
IRR 24.90186%

q
0 1000 discounting rate 10%
1 -500 ₹ -1,243.43
2 -500
3 -500
IRR 23.37519% ₹ -243.43 NPV

q 0 -1000
1 500
2 500
3 500

rate NPV_Finan NPV_Inve

2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
32%
34%
36%
38%
40%
 CF_D CF_RI
0 -1000 -2164.461248 -1000
1 2500 2500 0
2 -1540 -1164.461248 1335
MIRR 15.50218% 15.5422%

0 -20 -50
1 80 140 116.66666667 66.6666666666667

0 1 NPV IRR
low -20 80 ₹ 46.67 300%
high -50 140 ₹ 66.67 180%
H over L -30 60 ₹ 20.00 100%
spending 30 extra would increase my benefit by 20 so we can take high

-100 -100
100 15
15 15
15 125
IRR 22.29% 17.80%

0 -100 -100
1 100 15
2 15 15
3 15 125
Disc Rate NPV A
2% 26.59
4% 23.36
 6% 20.28
8% 17.36
10% 14.58
12% 11.92
14% 9.39
16% 6.96
18% 4.65
20% 2.43
22% 0.31
24% -1.73
26% -3.69
28% -5.57
30% -7.37
32% -9.11
34% -10.79
36% -12.40

Period A B
0 -500000 -600000 8%
1 200000 100000
2 250000 150000
3 275000 175000
4 185000 200000
5 225000
6 240000
7 250000
8 245000

IRR 29.021% 23.828%

NPV ₹ 253,804.28 ₹ 489,730.43

if termed into annuity ₹ -76,628.79 ₹ -85,220.32

70952.58535 78907.707566
B is better
CF _ Com
-2164.46124763705
0
2875
15.2508%

NPV V
Chart Title
46.91 100.00
39.42
80.00

60.00

40.00
 Chart Title
100.00

80.00
32.45
25.98 60.00
19.95
40.00
14.32
9.07 20.00
4.16
0.00
-0.44 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
-4.75 -20.00
-8.79
-40.00
-12.59
-16.16 -60.00
-19.52
NPV A NPV V
-22.69
-25.68
-28.50
-31.17
14 15 16 17 18
 6.2

test marketing 250000 not taken - sunk cost

land 150000 taken - opportunity cost
bowling ball machine 100000
time 5
salvage value 30000
tax rate 21%
zero line depreciation 20000 or straight line depreciation

0 1 2 3 4 5
q 5000 8000 12000 10000 6000
price 20 20.4 20.808 21.22416 21.64864
cost 10 11 12.1 13.31 14.641
sales 100000 163200 249696 212241.6 129891.9
Total cost 50000 88000 145200 133100 87846
EBITDA 50000 75200 104496 79141.6 42045.86
Depreciation 20000 20000 20000 20000 20000
EBT 30000 55200 84496 59141.6 22045.86
Tax 6300 11592 17744.16 12419.74 4629.63
Net Income 23700 43608 66751.84 46721.86 17416.23
Book Value 80000 60000 40000 20000 0

NWC 10000 10000 16320 24969.6 21224.16 12989.19

Change in NWC 10000 0 6320 8649.6 -3745.44
Recovery of NWC 21224.16
Salvage Value
(salvage value - book value at the end) *(1-tax)
machine cost 100000 23700 23700
OC 150000 150000

FCF 260000 43700 57288 78102.24 70467.3 232340.4

Actual Cf -260000 43700 57288 78102.24 70467.3 232340.4
IRR 18.471%
NPV at 10% ₹ 78,147.31
he end) *(1-tax)
 6.4
cost 80000
pre tax saving 22000
life 5 incremental EBITDA
depreciation 16000 incremental depreciation
salvage value 20000 incremental EBT
disc rate 10% tax
tax rate 21% incremental net income

investment
CF
CF with sign

NPV 10%

6.6
cost 200000
depreciation 50000
salvage value 30000 incremental ebitda
pre tax cost saving 60000 inc depreciation
tax rate 21% inc ebt
disc rate 16% tax
change in nwc 45000 inc NI

investment
change in nWC
Period CF
total CF
NPV
14.3644%
discounting rate higher than IRR and hence rejected
also NPV is negative

because its cash inflow, the change in NWC is negative

cost 10000
q 5
rent 24000
labour 4000
total cost 94000
investment 60000
depreciation 15000
salvage value 5000
change in NWC 40000
tax rate 21%
IRR 20%

-100k = dicounted cashflows at 20%

0 1 2
Inv 60000
NWC 40000
depreciation 0 15000 15000
FCF 100000 15000 15000
PV of CF 12500 10416.6666666667
sum of PV 60026.041667
PV at 0 39973.958333
 x ₹ -15,441.51

P/L
sales ₹ 128,546.21
cost 94000
dep 15000
tax 4104.7039182
Ni (s-109000)*0.79

price per truck ₹ 25,709.24

 0 1 2 3 4 5
income statement
22000 22000 22000 22000 22000 22000
16000 16000 16000 16000 16000 16000
6000 6000 6000 6000 6000 6000
1260 1260 1260 1260 1260 1260
4740 4740 4740 4740 4740 4740

cash flow
80000 15800
80000 20740 20740 20740 20740 36540
-80000 20740 20740 20740 20740 36540

8431.4745019

0 1 2 3 4
income statement
60000 60000 60000 60000 60000
50000 50000 50000 50000 50000
10000 10000 10000 10000 10000
2100 2100 2100 2100 2100
7900 7900 7900 7900 7900

cashflow
200000 23700
-45000 45000
57900 57900 57900 57900
-155000 57900 57900 57900 36600
₹ -4,749.14

0 1 2 3 4
income statement
 3 4
3950
40000
15000 15000
15000 58950
8680.5555556 28428.82
q1
Inputs P/L Inputs CF
Dep 1860 investment 9300
q 1400 life 5 0 1
cost 1.97 disc 14% investment 9300
price 4.95 tax 21% NI 1826.48
d 1860
sales 6930
cost 2758 Initial CF 9300
ebitda 4172 Period CF 3686.48
d 1860 Terminal CF
et 2312
tax 485.52 Total CF 9300 3686.48
CF with sign -9300 3686.48
NI 1826.48
NPV 3355.9843300773

q17

investment 425000 0 1 2
salvageabl 45000 book value 425000 340000 255000
d 85000 investment 425000
sales 275000 NI 36465 36465
fc 47000 d 85000 85000
vc 96250 change in NWC 25000
change in 25000
tax 22% initial 450000
disc 9% period 121465 121465
life 5 terminal

ebitda 131750 cf with sign -450000 121465 121465

ebt 46750 NPV 61517.3670195468
tax 10285
ni 36465
q17 twist

investment 425000 0 1 2
salvageabl 45000 book value 425000 364285.71428572 303571.4
d 60714.29 investment 425000
sales 275000 NI 55407.857142857 55407.86
fc 47000 d 60714.285714286 60714.29
vc 96250 cange in NWC 25000
change in 25000
tax 22% initial CF 425000
disc 9%
life 7 period 116122.14285714 116122.1
Terminal
ebitda 131750 total 450000 116122.14285714 116122.1
ebt 71035.71 CF with sign -450000 116122.14285714 116122.1
tax 15627.86
ni 55407.86 NPV at 58097.9687321806

q33

investment 645000 0 1 2
life 5 BV 645000 516000 387000
NWC 55000 Investment 645000
tax 21% NI
disc 12% d 129000 129000
salvageabl 50000 change in nwc 55000
depre 129000
ini CF 700000
ebitda per CF 129000 129000
here 12% is the IRR Terminal CF
CF with sign -700000 129000 129000

ebitda x
dep 129000

ebt x-B80
tax #VALUE!
NI #VALUE!
 Equivalent tota ₹ -181,362.03 NI NI
NI ₹ 50,311.59

₹ 63,685.56
₹ 192,685.56

ebitda ₹ 192,685.56

try replacement NPV problems

solve textbook problems tonight
 2 3 4 5

1826.48 1826.48 1826.48 1826.48

1860 1860 1860 1860

3686.48 3686.48 3686.48 3686.48

0

3686.48 3686.48 3686.48 3686.48

3686.48 3686.48 3686.48 3686.48

3 4 5
170000 85000 0
35100
36465 36465 36465
85000 85000 85000
25000

121465 121465 121465

60100

121465 121465 181565

 3 4 5
242857.1 182142.9 121428.6
61814.29
55407.86 55407.86 55407.86
60714.29 60714.29 60714.29
25000

116122.1 116122.1 116122.1

86814.29
116122.1 116122.1 202936.4
116122.1 116122.1 202936.4

3 4 5
258000 129000 0
39500

129000 129000 129000

55000

129000 129000 129000

94500
129000 129000 223500
NI NI NI
17
cost 425000
depreciati 60714.285714
salvage val 45000
sales 275000
FC 47000
VC 96250
Investment 25000
Tax 22%
ROR 9%

0 1 2 3 4 5
sales 275000 275000 275000 275000 275000
FC 47000 47000 47000 47000 47000
VC 96250 96250 96250 96250 96250
TC 143250 143250 143250 143250 143250
EBITDA 131750 131750 131750 131750 131750
D 60714.29 60714.2857143 60714.29 60714.29 60714.29
EBT 71035.71 71035.7142857 71035.71 71035.71 71035.71
Tax 15627.86 15627.8571429 15627.86 15627.86 15627.86
NI 55407.86 55407.8571429 55407.86 55407.86 55407.86

BV 425000 364285.7 303571.428571 242857.1 182142.9 121428.6

Investment 425000 61814.29
NI 55407.86 55407.8571429 55407.86 55407.86 55407.86
D 60714.29 60714.2857143 60714.29 60714.29 60714.29
Change in 25000 25000

Ini CF 450000
Period 116122.1 116122.142857 116122.1 116122.1 116122.1
Terminal CF 86814.29

CF -450000 116122.1 116122.142857 116122.1 116122.1 202936.4

NPV ₹ 58,097.97

33
cost 645000
life 5
NWC 55000
Tax 21%
ROR 12%
Salvage Va 50000
Depreciati 129000
 0 1 2 3 4
Investment 645000
Change in 55000
NI
D 129000 129000 129000 129000

CF 700000 129000 129000 129000 129000

Terminal
Total CF -700000 129000 129000 129000 129000

Total CF ₹ -181,362.03
NI ₹ 50,311.59
EBT ₹ 63,685.56
EBITDA ₹ 192,685.56
Investment 25000 25000
36465 36465 36465 36465 36465
85000 85000 85000 85000 85000
341400
CF -25000 121465 121465 121465 121465 487865
NPV ₹ 685,591.35
 5
39500
55000

129000

129000
94500
223500
Market Value 245000
EBIT 19000 Recession Normal Strong
debt 58800 EBIT 11400 19000 23750
Rd 0.08 Interest 4704 4704 4704
Oustanding shares 5000 NI 6696 14296 19046
EPS 1.762105 3.762105 5.012105
Stock price 49
Interest pay 4704

Stock repurchase 1200

Current outstanding 3800 Recession Normal Strong
EBIT 11400 19000 23750
tax 0.21 Interest 4704 4704 4704
EBT 6696 14296 19046
Tax 1406.16 3002.16 3999.66
NI 5289.84 11293.84 15046.34
EPS 1.392063 2.972063 3.959563

Q-4
Plan 1 Plan 2 Plan 1
Shares Out 365000 245000 Shares Out 365000
Debt 0 4560000 Debt 0
Rd 0.1 0.1 Rd 0.1
Interest 0 0 456000 Interest 0
EBIT 1250000 1250000 EBIT 1750000
NI 1250000 0 794000 NI 1750000
EPS 3.424658 3.240816 EPS 4.794521

Q-8
Shares out 5000 EBIT 43600
Stock price 49 EPS 8.72
Cash flow 872
 Plan 2
245000
4560000
0.1
0 456000
1750000
0 1294000
5.281633