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Financial Analysis: Assumptions

The document provides assumptions for a financial analysis including an initial investment of ₹1,71,41,700 with fixed and variable costs, equipment depreciating at 10% over 10 years, initial production of 150,000 units growing at 5% annually, and discount and tax rates of 10% and 25%. The financial analysis shows a positive net present value of ₹2,12,97,847.35, an internal rate of return of 17% exceeding the discount rate, and a profitability ratio above 1, indicating the project should be accepted.

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Prateek Verma
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38 views2 pages

Financial Analysis: Assumptions

The document provides assumptions for a financial analysis including an initial investment of ₹1,71,41,700 with fixed and variable costs, equipment depreciating at 10% over 10 years, initial production of 150,000 units growing at 5% annually, and discount and tax rates of 10% and 25%. The financial analysis shows a positive net present value of ₹2,12,97,847.35, an internal rate of return of 17% exceeding the discount rate, and a profitability ratio above 1, indicating the project should be accepted.

Uploaded by

Prateek Verma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Financial Analysis

Assumptions
Price ₹100/Unit
Total Initial Investment ₹1,71,41,700
(Cost of equipment+Working
capital+Additional Investment)
Total Cost Includes Fixed and Variable Cost
Life of equipment 10 years
Rate of depreciation(Straight-Line method) 10%
with 0 salvage value

Units produced initially and growth rate 1,50,000 units @ 5% growth rate
Discount rate and Tax rate 10% and 25% respectively
Total Cash Inflow ₹3,84,39,547.35
Financial Analysis

Approach Conditions Results

Net Present Value ₹2,12,97,847.35 Accept


(Positive)

Internal Rate of Return 17% Accept


(IRR>Discount rate)

Profitability Ratio 1.242 Accept


(PR>1)

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