For a ervee three year prevect, the following data are project\'s total operatin

Question

For a ervee three year prevect, the following data are project's total operating 2011 are so miniom Dirhams. revenues during 2012, which in the preseet starting year, corresponding market siees for 2013 and 2014 The initial equipment investment cost, paid at the beginning of year 2012, is o 45 million The estimated annual the end of linear depreciation cost is million Dirhams year no market value by The the project m is assumed starting year 2012, with costs and the operating expenses are 40% and 20% of the total operating is 12%. Eor the above given project answer the following: 2. Fill in the table below. or not? Explain the reason. Is the project (4 Marks) (8 Marks) rket size. in million Dirhams 2012 013 014 roperating revenues, in millions Dirhams ufacturing cost, in million Dirhams profit, in million Dirhams eguipment investment in million Dirhams iation, in million Dirhams Lance expenses in million Dirhams expenses in million Dirhams in million Dirhams

Explanation / Answer

1. the downside of papar is not clearly visible so you can change the table particulars as per your consideration

(in MN Dirhams)

2.

The formula for IRR is:

0 = P0 + P1/(1+IRR) + P2/(1+IRR)2 + P3/(1+IRR)3 + . . . +Pn/(1+IRR)n

0 = -.45 + (-.14)/(1+-.2421) + (-.008)/(1+-.2421)2 + (.2824)/(1+-.2421)3

so IRR is negative its -24.21% Which is less than MARR of 12% so project is not acceptable

particulars 2012 2013 2014 market size         55.00         60.50         66.55 Project Operating revenues           0.28           0.61           1.33 manufacturing cost           0.11           0.24           0.53 gross profit           0.17           0.36           0.80 initail equipment cost           0.45 depreciation           0.15           0.15           0.15 maintenance exp           0.10           0.10           0.10 other opearting exp           0.06           0.12           0.27 net profit         (0.14)         (0.01)           0.28

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