Scribd
Upload
10 views

CF 3B Revision Q

The document contains 5 sections that analyze two options for a business: Option 1 focuses on a single product (Diamond) and calculates its net present value over 5 years. It includes projections for sales, costs, taxes, cash flows, and a cumulative NPV of $1,127,076. Option 2 analyzes adding a second product (RotoEdge) and provides the same projections for 2 products over 5 years. Its cumulative NPV is slightly lower at $1,114,985. Both options are financially viable according to the projections, but Option 1 has a slightly higher NPV.

Uploaded by

noel25509542
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
10 views

CF 3B Revision Q

The document contains 5 sections that analyze two options for a business: Option 1 focuses on a single product (Diamond) and calculates its net present value over 5 years. It includes projections for sales, costs, taxes, cash flows, and a cumulative NPV of $1,127,076. Option 2 analyzes adding a second product (RotoEdge) and provides the same projections for 2 products over 5 years. Its cumulative NPV is slightly lower at $1,114,985. Both options are financially viable according to the projections, but Option 1 has a slightly higher NPV.

Uploaded by

noel25509542
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
You are on page 1/ 4

Working 1 Option 1

Capital allowances benefits


WDV Tax saved at 28%
Yr 2020 Cost 1,500,000
WDA 300,000 84,000
Yr 2021 WDV b/f 1,200,000
WDA 240,000 67,200
Yr 2022 WDV b/f 960,000
WDA 192,000 53,760
Yr 2023 WDV b/f 768,000
WDA 153,600 43,008
Yr 2024 WDV b/f 614,400
WDA 122,880 34,406
Yr 2025 WDV b/f 491,520
Balancing allowance 491,520 137,626
-
Working 2 Option 1
2020 2021 2022 2023 2024
Sales unit -Diamond 12,000 18,000 24,000 18,000
Sales receipt 1,440,000 2,160,000 2,880,000 2,160,000
Working capital required 144,000 216,000 288,000 216,000 144,000
Cash out flow (144,000) (72,000) (72,000) 72,000 72,000

Working 3 - Option 1 NBPV


2020 2021 2022 2023 2024
Sales receipt (W2) 1,440,000 2,160,000 2,880,000 2,160,000
Variable cost (576,000) (864,000) (1,152,000) (864,000)
Redundancy (144,000)
Fixed costs (300,000) (300,000) (300,000) (300,000)
Taxable profits (144,000) 564,000 996,000 1,428,000 996,000
Tax payment 40,320 (157,920) (278,880) (399,840) (278,880)
Net operating cash flow after tax (103,680) 406,080 717,120 1,028,160 717,120
Working capital movement (W2) (144,000) (72,000) (72,000) 72,000 72,000
Investment (1,500,000)
Capital allowance (W1) 84,000 67,200 53,760 43,008 34,406
Total cash flow (1,663,680) 401,280 698,880 1,143,168 823,526
Discounting factor 1 0.909 0.826 0.751 0.683
PV (1,663,680) 364,800 577,587 858,879 562,480

Working 4 Option 2
2020 2021 2022 2023 2024
Sales unit - Diamond 9,600 16,200 22,800 18,000
Sales unit - RotoEdge 4,800 3,600 2,400
Sales receipt 1,612,800 2,289,600 2,966,400 2,160,000
Working capital required 161,280 228,960 296,640 216,000 144,000
Cash out flow (161,280) (67,680) (67,680) 80,640 72,000

Working 5 - Option 2 NBPV


2020 2021 2022 2023 2024
Sales receipt (W4) 1,612,800 2,289,600 2,966,400 2,160,000
Variable cost RotoEdge (259,200) (194,400) (129,600) -
Variable cost Diamond (460,800) (777,600) (1,094,400) (864,000)
Redundancy (60,000) (48,000) (48,000) (24,000)
Fixed costs - RotoEdge (20,000) (20,000) (20,000)
Fixed costs - Diamond (300,000) (300,000) (300,000) (300,000)
Taxable profits (60,000) 524,800 949,600 1,398,400 996,000
Tax payment 16,800 (146,944) (265,888) (391,552) (278,880)
Net operating cash flow after tax (43,200) 377,856 683,712 1,006,848 717,120
Working capital movement (W2) (161,280) (67,680) (67,680) 80,640 72,000
Investment (1,500,000)
Capital allowance (W1) 84,000 67,200 53,760 43,008 34,406
Total cash flow (1,620,480) 377,376 669,792 1,130,496 823,526
Discounting factor 1 0.909 0.826 0.751 0.683
PV (1,620,480) 343,069 553,547 849,358 562,480
2025 Unit price
12,000 120
1,440,000
- 10% on next year's sales
144,000

2025
1,440,000
(576,000) Sales unit @48

(300,000)
564,000
(157,920)
406,080
144,000

137,626
687,706
0.621
427,011 1,127,076

2025 Unit price


12,000 120
96
1,440,000
- 10% on next year's sales
144,000

2025
1,440,000
- Sales unit @ 54
(576,000) Sales unit @48

(300,000)
564,000
(157,920)
406,080
144,000

137,626
687,706
0.621
427,011 1,114,985

You might also like