# Cap_bud - Mathematics on Capital Budge Instructions Capital...

This preview shows pages 1–4. Sign up to view the full content.

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

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
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
pital Budgeting Year 3 Year 4 Year 5

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 04/25/2011 for the course FIN 421 taught by Professor Anupchowdhury during the Spring '11 term at BRAC University.

### Page1 / 14

Cap_bud - Mathematics on Capital Budge Instructions Capital...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online