Cap_bud - Mathematics on Capital Budge Instructions Capital...

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Mathematics on Ca Instructions Year 0 Year 1 Year 2 Capital Expenditure -70000000 Production capacity 1500000 1500000 Capacity Utilization 33.33% 66.67% Total Production 499950 1000050 Selling price per unit 200 200 Total Sales 99990000 200010000 Less: Variable cost (60%) 59994000 120006000 Contribution Margin (40%) 39996000 80004000 Less: Fixed Cost 24000000 36000000 Less: Depreciation 9000000 9000000 Income before tax 6996000 35004000 Less: Income Tax (40%) 2798400 14001600 Net operating income 4197600 21002400 Add: Non-cash expenses(Depreciation) 9000000 9000000 Cash flow from operation 13197600 30002400 Less: Investment in Working capital 0 0 Add: Salvage value on fixed assets 0 0 Add: Salvage value on current assets 0 0 Total Projected cash flow -70000000 13197600 30002400 Present value of the cash flow (Tk.70,000,000.00) Tk.11,476,173.91 Tk.22,686,124.76 Net present value (NPV) Tk.65,438,004.16 IRR 36% Profitability Index 1.935 Workings: Calculation of Depreciation Cost of the machine 70000000 Residual value (10%) 7000000 Depreciable value 63000000 Number of years 7 Depreciation per year 9000000 Rate of return 15% Payback Period: Year Cashflow 0 (Tk.70,000,000.00) Tk.0.00 (Tk.70,000,000.00) 1 13,197,600.00 13,197,600.00 (56,802,400.00) 2 30,002,400.00 43,200,000.00 (26,800,000.00) 3 22,400,000.00 65,600,000.00 (4,400,000.00) 4 39,600,000.00 105,200,000.00 35,200,000.00 5 39,600,000.00 144,800,000.00 6 46,800,000.00 191,600,000.00 7 63,800,000.00 255,400,000.00 Accumulated Cash inflow Outstanding Balance
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So the payback period is 3.111 years Year 0 (Tk.70,000,000.00) Tk.0.00 (Tk.70,000,000.00) 1 11,476,173.91 11,476,173.91 (58,523,826.09) 2 22,686,124.76 34,162,298.68 (35,837,701.32) 3 14,728,363.61 48,890,662.28 (21,109,337.72) 4 22,641,428.53 71,532,090.81 1,532,090.81 5 19,688,198.72 91,220,289.53 6 20,232,931.49 111,453,221.02 7 23,984,783.15 135,438,004.16 So the payback period is 3.932 years Accounting Rate of Return (ARR) Average Return 26,485,714.29 Investment 70,000,000.00 ARR 38% Average Rate of Return (ARR) Average Return 26,485,714.29 Average Investment 38,500,000.00 ARR 69% Discounted Cashflow Accumulated Cash inflow Outstanding Balance
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pital Budgeting Year 3 Year 4 Year 5
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Cap_bud - Mathematics on Capital Budge Instructions Capital...

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