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202 Unit 5. Solution

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30 views9 pages

202 Unit 5. Solution

Uploaded by

indrajeet
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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Ex.

1 Payback Period Method 1

Initial Investment (Cost) / Annual Cash Inflows

Initial Invest Rs. 5,00,000


Annual CashRs. 1,00,000

Payback P5,00,000/ 1,00,000 5 years

Payback Per(Cash Inflows are not equal)

Ex. 2 Initial Invest Rs. 1,00,000

Year Cash Inflows


Cumulative Cash Inflows
1 30,000 30,000
2 40,000 70,000
3 25,000 95,000 Completed Year
4 20,000 115,000
5 15,000 130,000
Amount to be Recovered = 1,00,000 - 95,0000 = Rs. 5,000
Completed Years + Amount to be recovered / PV of cash Inflows of next year

3 years + Rs. 5,000 / 20,000


3 Years + 0.25
Pay Back3. 25 Years

Ex. 3 Post Payback Profitability Method

Initial Invest Rs. 50,000


Annual Cash Rs. 10,000
Life of the Pr 8 Years

Pay backInitial Investment (Cost) / Annual Cash Inflows


50,000 / 10, 5 years

Post Payback Profitability = Annual Cash Inflows * (Life – Payback Period)


10,000 (8 Yea
10,000 * 3 Rs. 30,000
Post Payback Profitability Index = (Post Payback Profitability/ Initial Investment) * 100
(30,000 / 50,60 %

Ex. 4 ARR

Average Inve20,00,000
No. of Years 4 years
ARR (Average annual Profit after Tax / Average Investment) *100
(2,40,000 / 2=12 %
1 Average Annual Profit and Tax = Total Profit After Tax and before Dep./ No. of Years
= (1,60,000 + 3,20,000 + 3,60,000 + 1,20,000) / 4
2 Average Investment = (Investment at the beginning +Investment at the end) / 2
Rs. 20,00,000

Ex. 5 Method 4 - Net present Value


Swara Ltd
Factor @ 10 % Inflows (4) = (2) *
Year Cash inflows(3) (3)
1 40,000 0.909 36360
2 80,000 0.826 66080
3 120000 0.751 90120
4 180000 0.683 122940
5 240000 Value0.621of Cash 149040
Inflows 464540

Net Present = Total Present value of Cash Inflow - Intial Investment


4,64,540 - 2,80,000
1,84,540 Rs.

Ex. 5 Oct 2022

Swaraj Ltd.

Initial invest 12,00,000 Rs.


Project Life 5

Pay Back Pe= Completed Years + Amount to be recovred / PV of Cash Inflows of Next Year
= 3 Years + 1,50,000 / 4,50,000
= 3 Years + 0.33 = 3.33 years
Year Cash Flows Cumulative cash inflows
1 300000 300000
2 300000 600000
3 450000 1050000 Completed Year
4 450000 1500000
5 750000 2250000

Amount to be12,00,000 - 10,51,50,000


PV of cash inflows for 4 th ye 4,50,000

Net Present value


Discounting Factor cash Inflows (4)
Year Cash Inflows (2) @ 10 % (3) = (2) * (3)
1 300000 0.909 272700
2 300000 0.826 247800
3 450000 0.751 337950
4 450000 0.683 307350
5 750000 0.621 465750
Value of Cash
Inflows 1631550

Net Present Valu= Total Present value of Cash Inflow - Intial Investment
= 16,31,550 - 12,00,000
4, 31,550

Profitability indexPresent Value of cash inflows / Initial Investment


16,31,550 / 12,00,000
1.36

Ex. IRR Mr. Amol


Initial Investment2,50,000
Net Present value @ 13 % Discounting Factor
Discounting Factor cash Inflows (4)
Year Cash Inflows (2) @ 13 % (3) = (2) * (3)
1 50000 0.885 44250
2 100000 0.783 78300
3 200000 0.693 138600
Total Cash Inflows 261150
Net Present Valu= Total Present value of Cash Inflow - Intial Investment
2,61,150 - 2,50,000
11,150

Net Present value @ 15 % Discounting Factor


Discounting Factor cash Inflows (4)
Year Cash Inflows (2) @ 15 % (3) = (2) * (3)
1 50000 0.869 43450
2 100000 0.756 75600
3 200000 0.657 131400
Total Cash Inflows 250450

Net Present Valu= Total Present value of Cash Inflow - Intial Investment
2,50450 - 2,50,000
450

Net Present value @ 18 % Discounting Factor


Discounting Factor cash Inflows (4)
Year Cash Inflows (2) @ 18 % (3) = (2) * (3)
1 50000 0.847 42350
2 100000 0.718 71800
3 200000 0.608 121600
Total Cash Inflows 235750

Net Present Valu= Total Present value of Cash Inflow - Intial Investment
2,35,750 - 2,50,000
-14,250

IRR = Lower Rate + (NPV at Lower Rate / Differences in Present Value ) * Difference in Rates
= 13 + (11,150 / -25,400) * 5
13 + (0.438 * 5)
13 + 2.195
IRR 15.20%
Inflows of next year

back Period)
Initial Investment) * 100

x and before Dep./ No. of Years


Rs. 2,40,000
Investment at the end) / 2

Column 3 Column 4
1 / (1 + 0.10)1 = 0.909 CF/ (1 + 0.10)1 40,000 / (1.10 36,363
1 / (1 + 0.10)2 = 1/(1.1)2 = 0CF/ (1 + 0.10)2 80,000 / (1.10 66080
1 / ( 1 + 0.10)3 = 1/ (1.1)3 = CF/ (1 + 0.10)3 1,20,000 / (1.10)3
1 / (1 + 0.10)4 = 1 (1.1)4 = 0.683
1/ (1 + 0.10)5 = 1/ (1.1)5 = 0.621

d / PV of Cash Inflows of Next Year


sh Inflow - Intial Investment

ws / Initial Investment
sh Inflow - Intial Investment

sh Inflow - Intial Investment

sh Inflow - Intial Investment

Present Value ) * Difference in Rates


Period)

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