Initial Cash Outflow

New Equipment Purchased

16500000

Operating Cash flows

year 1

Less
less

x
add

year 2

year 3

Sales Volume
70000
80000
Per Unit Sale Price
340
340
Estimated Sales Amount
70000 x 340
23800000 80000 x 340
27200000 100000 x 340
Externaility Adjustment
5000000
4200000
Adjusted Sales
18800000
23000000
Variable Cost (p.u)
150
150
150
Total Variable Cost
10500000
12000000
Fixed Cost
4500000
4500000
Gross Income
3800000
6500000
Depreciation
3300000
3300000
Earning Before Tax
500000
3200000
Tax
175000
1120000
Earning After Tax
325000
2080000
Depreciation Sheild
3300000
3300000
Net Cash Flows for the Year
3625000
5380000
Net Working Capital @ 20 % of sales
4760000
5440000
Adjusted Working Capital
4760000
680000
Net Operating Cash flows
-1135000
4700000
Externality Adjustment
Year 1
total sales before Project
80000 x 280
22400000
total sales after Project
65000 x 240
15600000
Externality Amount
6800000
Variable Cost Savings
Cost of Products before project
Cost of Products after project
Variable Cost Savings
Net Externality Adjustment

80,000x120
65,000 x 120

9600000
7800000
1800000
5000000

year
100000
340
34000000 85000 x 340
0
34000000
150
15000000
4500000
14500000
3300000
11200000
3920000
7280000
3300000
10580000
6800000
1360000
9220000

Year 2

toatl sales before Project

toatl sales after Project
Externality Amount
Variable Cost Savings
Cost of Products before project
Cost of Products after project
Variable Cost Savings
Net Externality Adjustment

60000 x 280
45000 x 240

16800000
10800000
6000000

60,000x120
45,000 x 120

7200000
5400000
1800000
4200000

Depreciation of Manufacturing Plant

Working Depreciation on Assumption Straight Line Methood with no residual value
Per Year Depreciation

Years
0
1
2
3
4
5
Net Cash Flows

16500000
5

CF

Ad. C.F.
PV @ 12%
PV @ 25%
-16500000 -17513392.9 -17513392.9
-17513392.8571429
-1135000
0
0
0
4700000
4700000 3746811.224
3008000
9220000
9220000 7350127.551
4720640
9747500
9747500 7770647.321
3992576
13272500
13272500 10580755.74
4349132.8
11934949
-1443044.05714286

Thus, NPV at Required Rate Of Return of 12%11934949

NPV

MIRR (by using Dis. App.)

3300000

12%
25%
11934948.98 -1443044.06

23.60%

P.B. Period

4700000
13920000
23667500

Therefore, the project should be accepted

P.B. Period

3.22 Years

year 4

year 5

85000
340
28900000 75000 x 340
0
28900000
150
12750000
4500000
11650000
3300000
8350000
2922500
5427500
3300000
8727500
5780000
-1020000
9747500
Add Back WC
Net CF ( Year 5)

75000
340
25500000
0
25500000
11250000
4500000
9750000
3300000
6450000
2257500
4192500
3300000
7492500
5100000
-680000
8172500
5100000
13272500