1) Define working capital requirement as: Receivables [(Sales/365)* average coll
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Question
1) Define working capital requirement as: Receivables [(Sales/365)* average collection period] + Inventories [One month material costs] - Payables [(Material costs/365)*average payment period)
2) Based on your projections of cash flows, compute a net present value (NPV) and internal rate of return (IRR).
3) What is the breakeven point in sales that makes NPV equal to zero? Restore the value of sales after using the “Goal seek” function
4) In addition to the above base case analysis, now conduct a scenario analysis based on the following two conditions.
Scenario 1: the consultants advised that the energy costs, the labor costs, and the material costs are likely to rise by 5% a year, starting in Year 2. Assume that the company cannot pass the extra cost through to the customer, i.e. the company could not increase the price.
Scenario 2: the consultants advised that the energy costs, the labor costs, and the material costs are likely to rise by 5% a year, starting in Year 2. Assume that the company can pass the extra cost through by increasing the price per unit by 5%. However, this would lead to a 2% drop in sales volume.
Hola Kola Project life 5 years Banck loan 5 years loan Annual intrest 16% dabt in capita 20% equity in capital 80% Weighted Average Cost Of Capital 18.20% The estimated sales of Zero-Carbonates by the consultant per month 600,000 liters price per liter 5 pesos This volume of Sales at the same price till 5 years Cost of the market study 5,000,000 pesos Cost of the machines + installation ######## pesos Depreciation in straight in next five years/per year 9,200,000 pesos Cost of the Lease per year 60,000 pesos Proposed number of inventory days 30 Proposed number of collection days 45 Proposed number of payable days 36 Working capital days 39 Raw material needed for each litre of Sodas 1.8 pesos Labor Cost per month 180000 pesos Energy Cost per month 50000 pesos Incremental General + Administrative Expenses Per Year 300000 pesos Overhead cost on new product launch 1% Existing erosion 800,000 Existing Tax Rate 30% Salvage Value 4,000,000Explanation / Answer
1,2,3 solutions.
4.)
5.)
Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Sales 36000000 36000000 36000000 36000000 36000000 Overhead cost 360000 360000 360000 360000 360000 Raw material 12960000 12960000 12960000 12960000 12960000 Deffered revenue expenditure as benefit will accrue to this period Cost of market study 5,000,000 1,000,000 1,000,000 1000000 1000000 1000000 Cost of Lease 60000 60000 60000 60000 60000 Recievables Labor cost 2160000 2160000 2160000 2160000 2160000 Inventories Energy Cost 600000 600000 600000 600000 600000 Payables Depriciation 46000000 9200000 9200000 9200000 9200000 9200000 Working capital requirement Incremental General + Administrative Expenses Per Year 300000 300000 300000 300000 300000 Earnings before interest and taxes 9,360,000 9,360,000 9,360,000 9,360,000 9,360,000 Interest on loan for machine taken 1472000 1472000 1472000 1472000 1472000 Earnings before Tax 7,888,000 7,888,000 7,888,000 7,888,000 7,888,000 less : taxes 2,366,400.00 2,366,400.00 2,366,400.00 2,366,400.00 2,366,400.00 Earnings After Taxes 5,521,600.00 5,521,600.00 5,521,600.00 5,521,600.00 5,521,600.00 Working capital requirement 4240109.589 Add: Depriciation & Deferred revenue exp. 10,200,000 10,200,000 10,200,000 10,200,000 10,200,000 Add: salvage value 4,000,000 Total cash flow -55240109.59 15,721,600.00 15,721,600.00 15,721,600.00 15,721,600.00 19,721,600.00 NPV Discount Rate 1 0.872668962 0.761551117 0.664582022 0.579960103 0.506113181 NPV Calculation -55240109.59 13719752.35 11972802.04 10448292.72 9117900.763 9981361.717 NPV 14.59099% IRR 14.59099% Computation Of BEP Variable cost 13320000 13320000 13320000 13320000 13320000 P/V Ratio Contribution/sales % 63% 63% 63% 63% 63% BEP Fixed Cost/P/V ratio 23479365.08 23479365.08 23479365.08 23479365.08 23479365.08Related Questions
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