Intial cost ₹ 127,000.
00 Discounting rate 14%
Installation cost ₹ 20,000.00
Cost ₹ 147,000.00
Net working capital ₹ 4,000.00
Total cost at Tzero ₹ 151,000.00
Incremental Revenue ₹ 85,000.00
Incremental costs 35.00%
₹ 29,750.00
Depreciation as per
SLM(5 years) ₹ 29,400.00
Salvage value at
T5(Terminal CF) ₹ 50,000.00
Capital Gain(Salvage-
Book value) ₹ 50,000.00
Tax rate 34%
Capital Gain tax ₹ 17,000.00
Particulars 0 1
Incremental Revenue ₹ 85,000.00
Less: Incremental Expenses ₹ -29,750.00
Less: Depreciation ₹ -29,400.00
EBIT ₹ 25,850.00
Less: Tax ₹ -8,789.00
₹ 17,061.00
Add: Depreciation ₹ 29,400.00
Incremental Cashflows -151000 ₹ 46,461.00
DF @ 14% 1 0.8771929825
-151000 ₹ 40,755.26
Salvage Value ₹ 50,000.00
Less: CG Tax ₹ -17,000.00
₹ 33,000.00
Add: NWC ₹ 4,000.00
Terminal Cashflow ₹ 37,000.00
Year
2 3 4 5
₹ 85,000.00 ₹ 85,000.00 ₹ 85,000.00 ₹ 85,000.00
₹ -29,750.00 ₹ -29,750.00 ₹ -29,750.00 ₹ -29,750.00
₹ -29,400.00 ₹ -29,400.00 ₹ -29,400.00 ₹ -29,400.00
₹ 25,850.00 ₹ 25,850.00 ₹ 25,850.00 ₹ 25,850.00
₹ -8,789.00 ₹ -8,789.00 ₹ -8,789.00 ₹ -8,789.00
₹ 17,061.00 ₹ 17,061.00 ₹ 17,061.00 ₹ 17,061.00
₹ 29,400.00 ₹ 29,400.00 ₹ 29,400.00 ₹ 29,400.00
₹ 46,461.00 ₹ 46,461.00 ₹ 46,461.00 ₹ 83,461.00
0.7694675285 0.6749715162 0.5920802774 0.5193686644
₹ 35,750.23 ₹ 31,359.85 ₹ 27,508.64 ₹ 43,347.03
27721 NPV
Initial outflow $ 5,000,000.00
Incremental Re $ 9,000,000.00 9 7
$ 7,000,000.00 2 2
Other product s $ 2,000,000.00 3.15 2.45
GP rate 35% $ 3,150,000.00 0.5 0.5
$ 2,450,000.00 3.65 2.95
25% $ 500,000.00 0.35 0.35
$ 6,100,000.00 1.2775 1.0325
23
-9.8
-6
7.2
6 12 15 15 15
21 22 24 24 24
5 7 10 12 13
-18 -22 -24 -25 -30
14 19 25 26 22
Incremental 5 6 1 -4
-14 -5 -6 -1 4
Q3
Year 1 Year 2 Year 3 Year 4 Year 5
Cash 6 12 15 15 15
Accounts receivable 21 22 24 24 24
Inventory 5 7 10 12 13
Accounts payable 18 22 24 25 30
Working Capital 14 19 25 26 22
Changes in Working Capital 14 5 6 1 -4
Q4
Year 0 Year 1 Year 2 Year 3 Year 4
Sales 23500 26438 23794 8566
COGS 9500 10688 9619 3483
Receivables 3525 3965.7 3569.1 1284.9
Payables 1425 1603.2 1442.85 522.45
Working Capital 2100 2362.5 2126.25 762.45
Change in Working Capital 2100 262.5 -236.25 -1363.8
Q5
Year 1 Year 2
Revenues 125 160
Operating expenses 40 60
Depreciation 25 36
Increase in net working capital 2 8
Capital Expenditures 30 40
Marginal Corporate tax rate 35% 35%
Incremental Earnings 60 64
39 41.6
Cash Flow 32 29.6
Q6
Keeping the old machine
Year 1
Gross margin 20000
Depreciation 10000
Market value 50000
Annual Cash Flow 10000
NPV ₹ 59,090.91
Replacing the old machine
Year 1
Gross margin 40000
Depreciation 15000
Cost of machine ₹ 150,000.00
Annual Cash Flow 25000
Rate 10%
PV ₹ 153,614.18
NPV
