Solution - Part2 - PART A Part (i) BEST CASE SCENARIO:...

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PART – A Part (i) BEST CASE SCENARIO: Calculation of Cost of Capital as per CAPM Ks = Rf + (Rm - Rf) x b where, Ks = Required rate of return Rf = Risk free rate of return Rm = Market rate of return b = beta Ks =5%+(12%-5%)*.9 11.30% Required rate of return for new venture =11.3%+2.7% 14.00% Now this rate of interest will be used for the purpose of evaluating the coffee machine project Calculation of the Terminal Cash flow: Recovery of Working Capital 66,886,506.74 40,000,000.00 Un-depreciated machine 5,000,000.00 111,886,506.74 Year--------> 1 2 3 4 5 6 7
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Sales Price 12,000.00 12,600.00 13,230.00 13,891.50 14,586.08 15,315.38 16,081.15 16,885.21 Units Sold 800.00 1,200.00 1,800.00 2,200.00 4,000.00 5,000.00 6,000.00 6,000.00 Sales Revenue(machines) 9,600,000.00 15,120,000.00 23,814,000.00 30,561,300.00 58,344,300.00 76,576,893.75 96,486,886.13 101,311,230.43 Sales Revenue(coffee) 3,168,000.00 4,752,000.00 7,128,000.00 8,712,000.00 15,840,000.00 19,800,000.00 23,760,000.00 23,760,000.00 Total Sales Revenue 12,768,000.00 19,872,000.00 30,942,000.00 39,273,300.00 74,184,300.00 96,376,893.75 120,246,886.13 125,071,230.43 Material Costs (per unit): Metal Part & electric components 2,525.00 2,777.50 3,055.25 3,360.78 3,696.85 4,066.54 4,473.19 4,920.51 Add: Wastage 252.50 277.75 152.76 168.04 184.84 203.33 223.66 246.03 Total 2,777.50 3,055.25 3,208.01 3,528.81 3,881.70 4,269.86 4,696.85 5,166.54 Plastic Part 925.00 971.25 1,019.81 1,070.80 1,124.34 1,180.56 1,239.59 1,301.57 Rubber Part 530.00 556.50 584.33 613.54 644.22 676.43 710.25 745.76 1,455.00 1,527.75 1,604.14 1,684.34 1,768.56 1,856.99 1,949.84 2,047.33 Add: Wastage 145.50 152.78 80.21 84.22 88.43 92.85 97.49 102.37 Total 1,600.50 1,680.53 1,684.34 1,768.56 1,856.99 1,949.84 2,047.33 2,149.70 Material Cost Metal Part & electric components 2,222,000.00 3,666,300.00 5,774,422.50 7,763,390.25 15,526,780.50 21,349,323.19 28,181,106.61 30,999,217.27 1,280,400.00 2,016,630.00 3,031,819.88 3,890,835.51 7,427,958.69 9,749,195.79 12,283,986.69 12,898,186.02 Total Material Cost 3,502,400.00 5,682,930.00 8,806,242.38 11,654,225.76 22,954,739.19 31,098,518.97 40,465,093.30 43,897,403.29 Labour Cost (per hour): Grade A 30.00 31.50 33.08 34.73 36.47 38.29 40.20 42.21 Grade B 42.00 44.94 48.09 51.45 55.05 58.91 63.03 67.44 72.00 76.44 81.16 86.18 91.52 97.20 103.23 109.66 Add: Down time cost 4.32 4.59 4.87 5.17 5.49 5.83 6.19 6.58 76.32 81.03 86.03 91.35 97.01 103.03 109.43 116.24 Add: Training Cost 11.45 8.10 4.30 4.57 4.85 5.15 5.47 5.81 Total Labour cost per 87.77 89.13 90.33 95.92 101.86 108.18 114.90 122.05
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hour Total Hours Required: Grade A 25,600.00 38,400.00 57,600.00 70,400.00 128,000.00 160,000.00 192,000.00 192,000.00 Grade B 19,200.00 28,800.00 43,200.00 52,800.00 96,000.00 120,000.00 144,000.00 144,000.00 Total hours required 44,800.00 67,200.00 100,800.00 123,200.00 224,000.00 280,000.00 336,000.00 336,000.00 Total Labour Cost 3,932,006.40 5,989,471.49
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Solution - Part2 - PART A Part (i) BEST CASE SCENARIO:...

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