Hind Petrochemicals Company is planning a capital investment of Rs 7,500 million for a refinery and machinery. The total cash outlay will be Rs 7,800 million including working capital of Rs 300 million. The project is expected to generate positive cash flows over 5 years. The net present value of the cash flows at a 15% discount rate is Rs 1,365 million, with an internal rate of return of 22% and a payback period of 3.25 years.
Hind Petrochemicals Company is planning a capital investment of Rs 7,500 million for a refinery and machinery. The total cash outlay will be Rs 7,800 million including working capital of Rs 300 million. The project is expected to generate positive cash flows over 5 years. The net present value of the cash flows at a 15% discount rate is Rs 1,365 million, with an internal rate of return of 22% and a payback period of 3.25 years.
Hind Petrochemicals Company is planning a capital investment of Rs 7,500 million for a refinery and machinery. The total cash outlay will be Rs 7,800 million including working capital of Rs 300 million. The project is expected to generate positive cash flows over 5 years. The net present value of the cash flows at a 15% discount rate is Rs 1,365 million, with an internal rate of return of 22% and a payback period of 3.25 years.
Hind Petrochemicals Company is planning a capital investment of Rs 7,500 million for a refinery and machinery. The total cash outlay will be Rs 7,800 million including working capital of Rs 300 million. The project is expected to generate positive cash flows over 5 years. The net present value of the cash flows at a 15% discount rate is Rs 1,365 million, with an internal rate of return of 22% and a payback period of 3.25 years.
Cost of refinery Cost of machinery Total capital investment Working capital Total cash outlay
(Rs mn.) 1,550 5,950 7,500 300 7,800
Discount rate
15%
Cash flows 0 Sales Less: Wages and salaries Selling and distribution costs Materials and consumables Depreciation (WDV) Corporate office costs Survey costs Total expenses Profit (loss) before tax Less: tax @ 35% Profit after tax Plus: depreciation CFO Cash outlay Working capital released Salvage value Book value Lost DTS on (SV -BV) Net cash flows NPV at 15% IRR Cumulative casf flows Payback (years)
Note: (1) Only Rs 15 million of survey cost is relevant. (2) All corporate office costs are not relevant for the project; Rs 100 million costs relate to the project. (3) Interest is a financing cost. Free cash flows are calculated, ignoring the interest charges.
