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Irr On Project and Irr On Equity: by Krigan Capital

This document provides an analysis of the internal rate of return (IRR) on a proposed project and equity for the project. It outlines the project details including total investment, project lifetime, depreciation, and debt vs equity portions. It then calculates the weighted average cost of capital (WACC) and provides cash flow projections for 5 years. The IRR on the project is calculated at 29.3% which is higher than the WACC of 11.93%, indicating the project is feasible. The document also includes a debt repayment schedule.

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Aziz Saputra
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81 views6 pages

Irr On Project and Irr On Equity: by Krigan Capital

This document provides an analysis of the internal rate of return (IRR) on a proposed project and equity for the project. It outlines the project details including total investment, project lifetime, depreciation, and debt vs equity portions. It then calculates the weighted average cost of capital (WACC) and provides cash flow projections for 5 years. The IRR on the project is calculated at 29.3% which is higher than the WACC of 11.93%, indicating the project is feasible. The document also includes a debt repayment schedule.

Uploaded by

Aziz Saputra
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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IRR ON PROJECT AND IRR ON EQUITY

BY KRIGAN CAPITAL

This Worksheet is created for non-financial professionals to understand the concept of IRR on Project and IRR on Equity
You can use this worksheet for free. May Allah reward us with kindness. For a further discussion, you can contact us on www.kri

PROJECT PROFILE & FINANCING STRUCTURE


Total Investment 20,000,000
Project Life Time (Year) 8
Depreciation/Year 2,500,000
Salvage Value 10.00%
Debt Portion 70.00%
Equty Portion 30.00%
Interest Rate 13.00%
Cost of Equity 17.00%

WACC CALCULATION
COST PORTION WEIGHTED
DEBT 13.00% 70.00% 9.10%
EQUITY 17.0% 30.00% 5.10%
WACC 11.93%

Year 1 Year 2 Year 3 Year 4 Year 5

REVENUE 12,000,000 13,200,000 14,520,000 15,972,000 17,569,200


COST OF SALES (inc. Depreciation) 6,500,000 6,825,000 7,166,250 7,524,563 7,900,791
GROSS PROFIT 5,500,000 6,375,000 7,353,750 8,447,438 9,668,409
OPERATING EXPENSES 2,400,000 2,520,000 2,646,000 2,778,300 2,917,215
OPERATING PROFIT 3,100,000 3,855,000 4,707,750 5,669,138 6,751,194
INTEREST 1,696,268 1,402,777 1,068,774 688,668 256,095

Cap Budgeting
PROFIT BEFORE TAX 1,403,732 2,452,223 3,638,976 4,980,470 6,495,099
TAX 350,933 613,056 909,744 1,245,117 1,623,775
NET PROFIT 1,052,799 1,839,168 2,729,232 3,735,352 4,871,324
PROFIT MARGIN 8.77% 13.93% 18.80% 23.39% 27.73%

FREE CASH FLOW TO FIRM


Year 1 Year 2 Year 3 Year 4 Year 5

INITIAL OUTLAYS (20,000,000) - - - - -


RESIDUAL VALUE - - - - -
UNDISCOUNTED CASH FLOW (20,000,000) 5,249,067 5,741,944 6,298,006 6,924,020 7,627,420
UNDISCOUNTED CUMM CF (20,000,000) (14,750,933) (9,008,989) (2,710,983) 4,213,037 11,840,457
1.00 1.00 1.00 0.39 0.00

IRR on Project 29.30% >> Project is feasible if IRR on Project > WACC
Discount Rate 11.93% >> Using WACC
Payback Period (Year) 3.39
NPV 14,548,193

Cap Budgeting
DEBT SCHEDULE

Year 1 Year 2

Beginning Balance 14,000,000 11,873,752

Interest 1,696,268 1,402,777

Principle 2,126,248 2,419,740

Ending Balance 11,873,752 9,454,012

1 2
Total Debt 14,000,000 (1,694,000.00) (1,539,147.53)
Interest Rate 13.00% 12.10%
Tenor 60
Installment/Month 318,543

Month Beginning Installment Interest


1 14,000,000.00 318,543.02 151,666.67
2 13,833,123.64 318,543.02 149,858.84
3 13,664,439.46 318,543.02 148,031.43
4 13,493,927.87 318,543.02 146,184.22
5 13,321,569.06 318,543.02 144,317.00
6 13,147,343.04 318,543.02 142,429.55
7 12,971,229.56 318,543.02 140,521.65
8 12,793,208.20 318,543.02 138,593.09
9 12,613,258.26 318,543.02 136,643.63
10 12,431,358.87 318,543.02 134,673.05
11 12,247,488.90 318,543.02 132,681.13
12 12,061,627.01 318,543.02 130,667.63
13 11,873,751.61 318,543.02 128,632.31
14 11,683,840.90 318,543.02 126,574.94
15 11,491,872.82 318,543.02 124,495.29
16 11,297,825.09 318,543.02 122,393.11
17 11,101,675.17 318,543.02 120,268.15
18 10,903,400.29 318,543.02 118,120.17
19 10,702,977.44 318,543.02 115,948.92
20 10,500,383.34 318,543.02 113,754.15
21 10,295,594.47 318,543.02 111,535.61
22 10,088,587.05 318,543.02 109,293.03
23 9,879,337.06 318,543.02 107,026.15
24 9,667,820.19 318,543.02 104,734.72
25 9,454,011.88 318,543.02 102,418.46
26 9,237,887.32 318,543.02 100,077.11
27 9,019,421.41 318,543.02 97,710.40
28 8,798,588.79 318,543.02 95,318.05
29 8,575,363.81 318,543.02 92,899.77
30 8,349,720.56 318,543.02 90,455.31
31 8,121,632.85 318,543.02 87,984.36
32 7,891,074.18 318,543.02 85,486.64
33 7,658,017.79 318,543.02 82,961.86
34 7,422,436.63 318,543.02 80,409.73
35 7,184,303.34 318,543.02 77,829.95
36 6,943,590.27 318,543.02 75,222.23
37 6,700,269.47 318,543.02 72,586.25
38 6,454,312.70 318,543.02 69,921.72
39 6,205,691.40 318,543.02 67,228.32
40 5,954,376.70 318,543.02 64,505.75
41 5,700,339.43 318,543.02 61,753.68
42 5,443,550.08 318,543.02 58,971.79
43 5,183,978.85 318,543.02 56,159.77
44 4,921,595.60 318,543.02 53,317.29
45 4,656,369.86 318,543.02 50,444.01
46 4,388,270.85 318,543.02 47,539.60
47 4,117,267.43 318,543.02 44,603.73
48 3,843,328.13 318,543.02 41,636.05
49 3,566,421.17 318,543.02 38,636.23
50 3,286,514.37 318,543.02 35,603.91
51 3,003,575.26 318,543.02 32,538.73
52 2,717,570.97 318,543.02 29,440.35
53 2,428,468.29 318,543.02 26,308.41
54 2,136,233.68 318,543.02 23,142.53
55 1,840,833.19 318,543.02 19,942.36
56 1,542,232.52 318,543.02 16,707.52
57 1,240,397.02 318,543.02 13,437.63
58 935,291.63 318,543.02 10,132.33
59 626,880.94 318,543.02 6,791.21
60 315,129.12 318,543.02 3,413.90

19,112,581.36 5,112,581.36
EDULE

Year 3 Year 4 Year 5

9,454,012 6,700,269 3,566,421

1,068,774 688,668 256,095

2,753,742 3,133,848 3,566,421

6,700,269 3,566,421 (0)

3 4 5
(1,221,784.24) (863,163.72) (457,922.54)

Principle Ending
166,876.36 13,833,123.64
168,684.18 13,664,439.46
170,511.60 13,493,927.87
172,358.80 13,321,569.06
174,226.02 13,147,343.04
176,113.47 12,971,229.56
178,021.37 12,793,208.20
179,949.93 12,613,258.26
181,899.39 12,431,358.87
183,869.97 12,247,488.90
185,861.89 12,061,627.01
187,875.40 11,873,751.61
189,910.71 11,683,840.90
191,968.08 11,491,872.82
194,047.73 11,297,825.09
196,149.92 11,101,675.17
198,274.87 10,903,400.29
200,422.85 10,702,977.44
202,594.10 10,500,383.34
204,788.87 10,295,594.47
207,007.42 10,088,587.05
209,250.00 9,879,337.06
211,516.87 9,667,820.19
213,808.30 9,454,011.88
216,124.56 9,237,887.32
218,465.91 9,019,421.41
220,832.62 8,798,588.79
223,224.98 8,575,363.81
225,643.25 8,349,720.56
228,087.72 8,121,632.85
230,558.67 7,891,074.18
233,056.39 7,658,017.79
235,581.16 7,422,436.63
238,133.29 7,184,303.34
240,713.07 6,943,590.27
243,320.79 6,700,269.47
245,956.77 6,454,312.70
248,621.30 6,205,691.40
251,314.70 5,954,376.70
254,037.28 5,700,339.43
256,789.35 5,443,550.08
259,571.23 5,183,978.85
262,383.25 4,921,595.60
265,225.74 4,656,369.86
268,099.02 4,388,270.85
271,003.42 4,117,267.43
273,939.29 3,843,328.13
276,906.97 3,566,421.17
279,906.79 3,286,514.37
282,939.12 3,003,575.26
286,004.29 2,717,570.97
289,102.67 2,428,468.29
292,234.62 2,136,233.68
295,400.49 1,840,833.19
298,600.66 1,542,232.52
301,835.50 1,240,397.02
305,105.39 935,291.63
308,410.70 626,880.94
311,751.81 315,129.12
315,129.12 (0.00)

14,000,000.00

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