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BILAL - ANIL - ECF6110 (2).docx - ECF6110 BUSINESS FINANCE...

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ECF6110 BUSINESS FINANCE1
Table of ContentsIntroduction..............................................................................................................................3Analysis.....................................................................................................................................41.Analysis of the company from which the equipment is to be purchased by ABCcompany:...................................................................................................................................42.Prepare a cash flow table (which incorporates taxes and includes initialinvestment, operating and terminal cash flows)....................................................................53.Clearly state the assumptions with justification used to arrive at the cash flows...84.It is necessary to check if the project made financial sense before it is accepted....95. Advise the executive committee and the CFO on whether they should invest in thenew liquid detergent project. Discuss the reasons for your recommendation and any...10reservations you may have in given this advice...................................................................10Conclusion...............................................................................................................................11Recommendation....................................................................................................................12References...............................................................................................................................13Appendix.................................................................................................................................142
IntroductionIn this project report, we take an ABC company for our report, which deal in a laundrydetergent. This company majorly produce two product lines: one is concentrated powderdetergent and the other product is the traditional powder detergent. Company wants to expandtheir product lines. So, company is in dilemma among the two different companies for theimperative purpose of expanding the product lines. For this purpose, company need to make acomparison by calculating the different approaches such as Net Present Value (NPV), InternalRate of Return (IRR), Payback period and the analysis of the sensitivity. Company needs toanalyses and take an appropriate decision for the sake of it, so they able to generate moreprofit from the new product line. The company should work according the justifiedassumptions so that company may work accordingly. In this project report, various financialassumptions and calculation for the analysis of the NPV and the IRR needs to be done. Sothat company may work as per the outcome revealed.3
Analysis1.Analysis of the company from which the equipment is to be purchased by ABCcompany:Year012345678910Alley LimitedBook Value150000097500063375041193826775917404411312873533477973106820194Debt10000001000000100000010000001000000100000010000001000000100000010000001000000Investment inspecialisedmachinery-1500000Tax saving onDepreciation1575001023756654443253281151827511878772150193262Interest Cost aftertax-70000-70000-70000-70000-70000-70000-70000-70000-70000-70000Salvage Value80000Tax on profit onsale-17942Total-15000008750032375-3456-26747-41885-51725-58122-62279-64981-4680PV of Total Cost-1522022Forth LimitedBook Value8000005600003920002744001920801344569411965883461183228322598Debt30000030000030000030000030000030000011000001100000110000011000001100000investment inspecializedmachinery-800000-800000Tax Saving onDepreciation7200050400352802469617287121018471593041512905Saving on repaircost after tax21000210002100021000210002100021000210002100021000Interest Cost aftertax-21000-21000-21000-21000-21000-21000-77000-77000-77000-77000Salvage Value500004
Loss on Sale ofMachinery aftertax-59119Total-80000072000504003528024696-79183212101-47529-50070-51849-53095PV of Total Cost-1112512Through analysis of the case study it has been determined that the if the ABC company ispurchasing the specialised equipment and packaging facilities from Alley limited then it will

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Term
Summer
Professor
NoProfessor
Tags
Net Present Value, analysis of the company

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