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    Finance Seminar 4

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    phoebe8soh
    This document summarizes the projected financial performance of a project over 5 years, including sales projections, costs of goods sold, operating expenses, cash flows, tax calculations, and investment metrics like NPV, IRR, and payback period. Based on the analysis, the project has a positive NPV at 13% discount rate, IRR exceeds the threshold of 13-14%, and payback period is under 5 years, so the decision is to accept the project.

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    Finance Seminar 4

    Uploaded by

    phoebe8soh
    7 views2 pages
    This document summarizes the projected financial performance of a project over 5 years, including sales projections, costs of goods sold, operating expenses, cash flows, tax calculations, and investment metrics like NPV, IRR, and payback period. Based on the analysis, the project has a positive NPV at 13% discount rate, IRR exceeds the threshold of 13-14%, and payback period is under 5 years, so the decision is to accept the project.

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    This document summarizes the projected financial performance of a project over 5 years, including sales projections, costs of goods sold, operating expenses, cash flows, tax calculations, and investment metrics like NPV, IRR, and payback period. Based on the analysis, the project has a positive NPV at 13% discount rate, IRR exceeds the threshold of 13-14%, and payback period is under 5 years, so the decision is to accept the project.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    7 views2 pages

    Finance Seminar 4

    Uploaded by

    phoebe8soh
    This document summarizes the projected financial performance of a project over 5 years, including sales projections, costs of goods sold, operating expenses, cash flows, tax calculations, and investment metrics like NPV, IRR, and payback period. Based on the analysis, the project has a positive NPV at 13% discount rate, IRR exceeds the threshold of 13-14%, and payback period is under 5 years, so the decision is to accept the project.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 2

    Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

    Sales Unit 200 210 220 230 240


    Unit Value 2.5 2.7 2.9 3 3.1
    COS Unit Value 1.77 1.89 2.03 2.1 2.17
    Operating Cost 70 80 90 95 100
    Working Capital 45 5 5 5

    Year 0 Year 1 Year 2 Year 3 Year 4 Year 5


    Outlay
    Equipment Cost -280
    (+) Delivery/Installing/Training -20
    (+) Working Capital -45

    Cashflow
    Sales (Sales unit x Sales units value) 500 567 638 690 744
    (-) COS (Sales unit x COS unit value) 354 396.9 446.6 483 520.8
    (-) Operating expenses 70 80 90 95 100
    EBIT (Earnings before interest/tax) 76 90.1 101.4 112 123.2

    (Equipment Cost + Deliver Cost)


    Asset Value Capital Allowance (20%) Tax (25%)
    Year 0 300
    Year 1 240 60 15
    Year 2 192 48 12
    Year 3 153.6 38.4 9.6
    Year 4 122.88 30.72 7.68
    Year 5 42 80.88 20.22
    (-) Tax (25%) 19 22.525 25.35 28 30.8
    Operating income after tax 57 67.575 76.05 84 92.4

    (-) Increase in working capital 5 5 5


    (+) Scrap 42
    (+) Tax Savings 15 12 9.6 7.68 20.22
    (+) Working Capital Recovery 60
    Project Cash Flow -345 67 74.575 80.65 91.68 214.62

    NPV (13%) -345 59.29204 58.40316 55.8945 56.22906 116.4871 1305.893


    NPV (14%) -345 58.77193 57.38304 54.43645 54.28192 111.4669 -8659.754

    IRR (13%-14%)
    13.131039250866
    Payback Period
    4.14488398098966
    Payback Cumulative CF
    Year 0 -345 -345
    Year 1 67 -278
    Year 2 74.575 -203.425
    Year 3 80.65 -122.775
    Year 4 91.68 -31.0949999999999
    Year 5 214.62 183.525

    Decision NPV Accept


    IRR Reject
    Paayback Reject
    *opportunity cost $3m sales over 5 years (if abandon project loss $3m)
    *if you stop production, will customer stay? Impact sahre price, reputation
    *Competitor
    *Sensitivity Snalysis
    *Forecast Value

    ACCEPT PROJECT - NPV still positive, no loss

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