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    Finance - Capital Budgeting: Name-Mancy Khadka Bba Iv

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    Anmol Shrestha
    The document discusses capital budgeting for a proposed drink glider business in Kathmandu, Nepal. It projects cash flows over 5 years, with initial costs of Rs. 10,00,000 and positive cash flows beginning in year 1. It calculates key capital budgeting metrics: the net present value is Rs. 17,15,462.8, the profitability index is 2.72, and both the payback period and discounted payback period are less than 3 years. Based on these results, the document concludes the drink glider project is financially feasible.

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    Finance - Capital Budgeting: Name-Mancy Khadka Bba Iv

    Uploaded by

    Anmol Shrestha
    32 views4 pages
    The document discusses capital budgeting for a proposed drink glider business in Kathmandu, Nepal. It projects cash flows over 5 years, with initial costs of Rs. 10,00,000 and positive cash flows beginning in year 1. It calculates key capital budgeting metrics: the net present value is Rs. 17,15,462.8, the profitability index is 2.72, and both the payback period and discounted payback period are less than 3 years. Based on these results, the document concludes the drink glider project is financially feasible.

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    The document discusses capital budgeting for a proposed drink glider business in Kathmandu, Nepal. It projects cash flows over 5 years, with initial costs of Rs. 10,00,000 and positive cash flows beginning in year 1. It calculates key capital budgeting metrics: the net present value is Rs. 17,15,462.8, the profitability index is 2.72, and both the payback period and discounted payback period are less than 3 years. Based on these results, the document concludes the drink glider project is financially feasible.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    32 views4 pages

    Finance - Capital Budgeting: Name-Mancy Khadka Bba Iv

    Uploaded by

    Anmol Shrestha
    The document discusses capital budgeting for a proposed drink glider business in Kathmandu, Nepal. It projects cash flows over 5 years, with initial costs of Rs. 10,00,000 and positive cash flows beginning in year 1. It calculates key capital budgeting metrics: the net present value is Rs. 17,15,462.8, the profitability index is 2.72, and both the payback period and discounted payback period are less than 3 years. Based on these results, the document concludes the drink glider project is financially feasible.

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    FINANCE – CAPITAL

    BUDGETING
    Name- Mancy Khadka
    BBA IV

    Ace International Business School


    The Drink Glider
    The concept of food truck has been around since ancient times when the street vendors in ancient
    Rome sold their food to public from wooden street carts. Fast forward to 21st century, people still
    appreciate how convenient it is to grab food and drinks from such food trucks. The food truck
    business has evolved from serving limited snacks to different cuisines. There are food trucks in
    Nepal that serve Nepali cuisine to Mexican Snacks, which are mainly based in places like
    Gairidhara and Naxal. These restaurants are called Food Truck Park and Pangra Express which
    are increasingly getting popular these days.

    The Drink Glider is a small vehicle with a drink and coffee bar that serves exciting to-go
    cocktails, mock tails, coffees and chilled soft drinks as well. The drink is confined to be located
    in highly urban areas of Kathmandu such as Thamel. A designer immobile food truck that is
    around 4 meter long would cost around 5 lakhs and the rest of the 5 lakhs would be spent on the
    required kitchen equipment and all the other necessary ingredients.

    The following is the assumption and projection of capital budgeting in the business for the next
    five years of period:-

    Year Cash Flow


    0 (1,00,00,000)
    1 300,000
    2 550,000
    3 700,000
    4 10,50,000
    5 12,00,000

    Let’s assume that after average sales, catering and events, the amount of cash flows in the five
    years of time is three lakhs, five lakhs fifty thousand, seven lakhs, ten lakhs and fifty thousand
    and twelve lakhs.
    Year Cash Flow Accumulated Cash Discounted Cash Flow Accumulated Discounted
    (Rs.) Flow (Rs.) Cash Flow
    (Rs.) (Rs.)
    0 (10,00,000) - (10,00,000) -
    1 3,00,000 3,00,000 2,72,727.27 2,72,727.27
    2 5,50,000 8,50,000 4,54,545.45 7,27,272.72
    3 7,00,000 15,50,000 5,25,920.36 12,53,793.08
    4 10,50,000 26,00,000 7,17,164.13 19,70,357.21
    5 12,00,000 38,00,000 7,45,105.59 27,15,462.8
    NPV= 1715462.8
    Now, we have to calculate the Net Present Value, Profitability Index, Payback period and
    discounted payback period to check the feasibility of the business.

    1. Net Present Value = PV of CI –CO


    = 27, 15,462.8 - 10, 00,000
    = Rs. 17, 15, 462.8

    PV of CI
    2. Profitability Index =
    CO

    27,15,462.8
    =
    10,00,000

    = 2.72
    10,00,000−8,50,000
    3. Payback Period = 2 +
    7,00,000

    = 2.21 years

    10,00,000−7,27,272.72
    4. Discounted Payback Period = 2 +
    5,25,920.36

    = 2.52 years

    Feasibility Statements:-

     The Net Present Value of the project is positive, hence the project is feasible and should be
    accepted.

     The Profitability Index of the project is greater than 1 hence, the project is beneficial and
    should be accepted.

     Because the Payback period and discounted payback period are less than the investment
    horizon, the project is feasible and should be accepted.

     Thus, the project is feasible from all the aspects of Capital Budgeting.

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