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Forecast Sales 2,000,000
sales commision 15%
Material cost 600,000
Labor Cost 900,000Direct Cost 1,500,000
Annual cash flow 200,000 EBITDA
new equipment 600,000
economic life 10 years
interest rate for loan 8%
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No Tax
Years 0 1 2 3 4 5 6 7
Nett Investment
Equipment Cost
Operating Cash Flow
Sales
Commision
Direct cost (mat)
Direct cost (labor)
Depreciation
EBIT
Tax
Nett Income
Add depreciation
Nett Casho Flow (600,000) 200,000 200,000 200,000 200,000 200,000 200,000 200,000
PV of 1 factor
Present Value
Net Present Value
Internal rate of return 31.11%
Profitability index
Payback Period
Discounted Payback 3.00 (400,000) (200,000) - 200,000 400,000 600,000 800,000
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8 9 10
200,000 200,000 200,000
1,000,000 1,200,000 1,400,000
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Tax 45%
Years 0 1 2 3 4 5 6 7
Nett Investment
Equipment Cost (600,000)
Operating Cash Flow
Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)
Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)
Direct cost (labor) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000)
Depreciation (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) (60,000)
EBIT 140,000 140,000 140,000 140,000 140,000 140,000 140,000
Tax (63,000) (63,000) (63,000) (63,000) (63,000) (63,000) (63,000)
Nett Income 77,000 77,000 77,000 77,000 77,000 77,000 77,000
Add depreciation 60,000 60,000 60,000 60,000 60,000 60,000 60,000137,000 137,000 137,000 137,000 137,000 137,000 137,000
Nett Casho Flow (600,000) 137,000 137,000 137,000 137,000 137,000 137,000 137,000
PV of 1 factor
Present Value
Net Present Value
Internal rate of return 18.73%
Profitability index
Payback Period
Discounted Payback 4.38 (463,000) (326,000) (189,000) (52,000) 85,000 222,000 359,000
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8 9 10
2,000,000 2,000,000 2,000,000
(300,000) (300,000) (300,000)
(600,000) (600,000) (600,000)
(900,000) (900,000) (900,000)
(60,000) (60,000) (60,000)
140,000 140,000 140,000
(63,000) (63,000) (63,000)
77,000 77,000 77,000
60,000 60,000 60,000
137,000 137,000 137,000
137,000 137,000 137,000
496,000 633,000 770,000
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Tax 45%
WACC 12%
Years 0 1 2 3 4 5 6 7
Nett Investment
Equipment Cost (600,000)
Operating Cash Flow
Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)
Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)
Direct cost (labor) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000)
Depreciation (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) (60,000)
EBIT 140,000 140,000 140,000 140,000 140,000 140,000 140,000
Tax (63,000) (63,000) (63,000) (63,000) (63,000) (63,000) (63,000)
Nett Income 77,000 77,000 77,000 77,000 77,000 77,000 77,000Add depreciation 60,000 60,000 60,000 60,000 60,000 60,000 60,000
137,000 137,000 137,000 137,000 137,000 137,000 137,000
Nett Casho Flow (600,000) 137,000 137,000 137,000 137,000 137,000 137,000 137,000
PV of 1 factor 1.00 0.89 0.80 0.71 0.64 0.57 0.51 0.45
Present Value (600,000) 122,321 109,216 97,514 87,066 77,737 69,408 61,972
Accumulated Cash Flow (463,000) (326,000) (189,000) (52,000) 85,000 222,000 359,000
Accumulated PV to CF (477,679) (368,463) (270,949) (183,883) (106,146) (36,737) 25,235
Present Value 774,081
Net Present Value 174,081
Internal rate of return 18.73% (Accept because IRR is greater than WACC )
Profitability index 1.290
Payback Period 4.38
Discounted Payback 6.59
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8 9 10
2,000,000 2,000,000 2,000,000
(300,000) (300,000) (300,000)
(600,000) (600,000) (600,000)
(900,000) (900,000) (900,000)
(60,000) (60,000) (60,000)
140,000 140,000 140,000
(63,000) (63,000) (63,000)
77,000 77,000 77,000
60,000 60,000 60,000
137,000 137,000 137,000
137,000 137,000 137,000
0.40 0.36 0.32
55,332 49,404 44,110
496,000 633,000 770,000
80,567 129,970 174,081
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Tax 45%
WACC 12%
Years 0 1 2 3 4 5 6 7 8
Nett Investment
Equipment Cost ###
Operating Cash Flow
Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)
Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)
Direct cost (labor) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000)
Depreciation (200,000) (80,000) (40,000) (40,000) (40,000) (40,000) (40,000) (40,000)
EBIT - 120,000 160,000 160,000 160,000 160,000 160,000 160,000
Tax - (54,000) (72,000) (72,000) (72,000) (72,000) (72,000) (72,000)
Nett Income - 66,000 88,000 88,000 88,000 88,000 88,000 88,000Add depreciation 200,000 80,000 40,000 40,000 40,000 40,000 40,000 40,000
200,000 146,000 128,000 128,000 128,000 128,000 128,000 128,000
Nett Cash Flow ### 200,000 146,000 128,000 128,000 128,000 128,000 128,000 128,000
PV of 1 factor 1.00 0.89 0.80 0.71 0.64 0.57 0.51 0.45 0.40
Present Value ### 178,571 116,390 91,108 81,346 72,631 64,849 57,901 51,697
Accumulated Cash Flow (400,000) (254,000) (126,000) 2,000 130,000 258,000 386,000 514,000
Accumulated PV to CF (421,429) (305,038) (213,930) (132,584) (59,953) 4,895 62,796 114,493
Present Value 801,864
Net Present Value 201,864
Internal rate of return 20.49%
Profitability index 1.336
Payback Period 3.98
Discounted Payback 5.92
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9 10
2,000,000 2,000,000
(300,000) (300,000)
(600,000) (600,000)
(900,000) (900,000)
(40,000) (40,000)
160,000 160,000
(72,000) (72,000)
88,000 88,000
40,000 40,000
128,000 128,000
128,000 128,000
0.36 0.32
46,158 41,213
642,000 770,000
160,651 201,864
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Tax 45%
WACC 12%
Years 0 1 2 3 4 5 6 7 8
Nett Investment
Equipment Cost ###
Additional Working Capital ###
Operating Cash Flow
Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)
Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)
Direct cost (labor) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000)
Depreciation (200,000) (80,000) (40,000) (40,000) (40,000) (40,000) (40,000) (40,000)
EBIT - 120,000 160,000 160,000 160,000 160,000 160,000 160,000
Tax - (54,000) (72,000) (72,000) (72,000) (72,000) (72,000) (72,000)Nett Income - 66,000 88,000 88,000 88,000 88,000 88,000 88,000
Add depreciation 200,000 80,000 40,000 40,000 40,000 40,000 40,000 40,000
200,000 146,000 128,000 128,000 128,000 128,000 128,000 128,000
Nett Casho Flow ### 200,000 146,000 128,000 128,000 128,000 128,000 128,000 128,000
PV of 1 factor 1.00 0.89 0.80 0.71 0.64 0.57 0.51 0.45 0.40
Present Value ### 178,571 116,390 91,108 81,346 72,631 64,849 57,901 51,697
Accumulated Cash Flow (700,000) (554,000) (426,000) (298,000) (170,000) (42,000) 86,000 214,000
Accumulated PV to CF (721,429) (605,038) (513,930) (432,584) (359,953) (295,105) (237,204) (185,507)
Present Value 898,456
Net Present Value (1,544)
Internal rate of return 11.96%
Profitability index 0.998
Payback Period 6.33
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Discounted Payback (>10 )
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9 10
300,000
2,000,000 2,300,000
(300,000) (300,000)
(600,000) (600,000)
(900,000) (900,000)
(40,000) (40,000)
160,000 460,000
(72,000) (72,000)88,000 388,000
40,000 40,000
128,000 428,000
128,000 428,000
0.36 0.32
46,158 137,805
342,000 770,000(139,349) (1,544)
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Tax 45%
WACC 12%
NBV 400,000
Sell 200,000
Old Equipment ###
2004 2005 2006 2007 2008 2009 2010 2011
NEW EQUIPMENT
Years 0 1 2 3 4 5 6
Nett Investment
Equipment Cost ###
Additional Working Capital 200,000
Tax reduction sell below NBV 90,000
(710,000)
Operating Cash FlowOriginal EBITDA
Cost Saving 200,000 200,000 200,000 200,000 200,000 200,000
EBITDA 200,000 200,000 200,000 200,000 200,000 200,000
Depreciation Old (200,000) (80,000) (40,000) (40,000) (40,000) (40,000) (40,000)
Depreciation New (333,333) (133,333) (66,667) (66,667) (66,667) (66,667)
ifferenciation of Depreciation (253,333) (93,333) (26,667) (26,667) (26,667) (26,667)
EBIT (53,333) 106,667 173,333 173,333 173,333 173,333
Tax 24,000 (48,000) (78,000) (78,000) (78,000) (78,000)
Nett Income (29,333) 58,667 95,333 95,333 95,333 95,333
Add depreciation 253,333 93,333 26,667 26,667 26,667 26,667224,000 152,000 122,000 122,000 122,000 122,000
Free Cash Flow (710,000) 224,000 152,000 122,000 122,000 122,000 122,000
PV of 1 factor 1.0000 0.8929 0.7972 0.7118 0.6355 0.5674 0.5066
Present Value (710,000) 200,000 121,173 86,837 77,533 69,226 61,809
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Accumulated Cash Flow (486,000) (334,000) (212,000) (90,000) 32,000 154,000
Accumulated PV to CF (510,000) (388,827) (301,989) (224,456) (155,230) (93,421)
Present Value 833,936
Net Present Value 123,936
Internal rate of return 16.32%
Profitability index 1.175
Payback Period 4.74
Discounted Payback 7.78
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2012 2013 2014 2015
7 8 9 10
(300,000) 300,000
(300,000) 300,000
200,000
200,000 200,000 200,000 200,000
200,000 200,000 200,000 400,000
(40,000) (40,000) (40,000)
(66,667) (66,667) (66,667) (66,667)
(26,667) (26,667) (26,667) (66,667)
173,333 173,333 173,333 333,333
(78,000) (78,000) (78,000) (150,000)
95,333 95,333 95,333 183,333
26,667 26,667 26,667 66,667
122,000 122,000 (178,000) 550,000
122,000 122,000 (178,000) 550,000
0.4523 0.4039 0.3606 0.3220
55,187 49,274 (64,189) 177,085
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276,000 398,000 220,000 770,000
(38,234) 11,039 (53,149) 123,936
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Tax 45%
WACC 12%
NBV 400,000
Sell 200,000
2004 2005 2006 2007 2008 2009 2010 2011
OLD EQUIPMENT
Years 0 1 2 3 4 5 6 7
Nett Investment
Equipment Cost
Additional Working Capital
Operating Cash Flow
Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)
Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)
Direct cost (labor) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000)
Depreciation (80,000) (40,000) (40,000) (40,000) (40,000) (40,000)
EBIT 120,000 160,000 160,000 160,000 160,000 160,000
Tax (54,000) (72,000) (72,000) (72,000) (72,000) (72,000)
Nett Income 66,000 88,000 88,000 88,000 88,000 88,000
Add depreciation 80,000 40,000 40,000 40,000 40,000 40,000
146,000 128,000 128,000 128,000 128,000 128,000
2004 2005 2006 2007 2008 2009 2010 2011
NEW EQUIPMENT
Years 0 1 2 3 4 5 6
Nett Investment
Equipment Cost ###
Additional Working Capital 200,000
original cash flow inyear 2005 (noaccumulation for newequipment
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Tax reduction sell below NBV 90,000
(710,000)
Operating Cash Flow
Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)
Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)
Direct cost (labor) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000)
Cost Saving 200,000 200,000 200,000 200,000 200,000 200,000
Depreciation (333,333) (133,333) (66,667) (66,667) (66,667) (66,667)
EBIT 66,667 266,667 333,333 333,333 333,333 333,333
Tax (30,000) (120,000) (150,000) (150,000) (150,000) (150,000)
Nett Income 36,667 146,667 183,333 183,333 183,333 183,333
Add depreciation 333,333 133,333 66,667 66,667 66,667 66,667
(710,000) 370,000 280,000 250,000 250,000 250,000 250,000
Differential Cash Flow (710,000) 224,000 152,000 122,000 122,000 122,000 122,000PV of 1 factor 1.0000 0.8929 0.7972 0.7118 0.6355 0.5674 0.5066
Present Value (710,000) 200,000 121,173 86,837 77,533 69,226 61,809
Accumulated Cash Flow (486,000) (334,000) (212,000) (90,000) 32,000 154,000
Accumulated PV to CF (510,000) (388,827) (301,989) (224,456) (155,230) (93,421)
Present Value 833,936
Net Present Value 123,936
Internal rate of return 16.32%
Profitability index 1.175
Payback Period 4.74
Discounted Payback 7.78
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2012 2013 2014 2015
8 9 10
300,000
300,000
2,000,000 2,000,000 2,000,000
(300,000) (300,000) (300,000)(600,000) (600,000) (600,000)
(900,000) (900,000) (900,000)
(40,000) (40,000) (40,000)
160,000 160,000 160,000
(72,000) (72,000) (72,000)
88,000 88,000 88,000
40,000 40,000 40,000
128,000 128,000 428,000
2012 2013 2014 2015
7 8 9 10
300,000
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300,000
2,000,000 2,000,000 2,000,000 2,000,000
(300,000) (300,000) (300,000) (300,000)
(600,000) (600,000) (600,000) (600,000)(900,000) (900,000) (900,000) (900,000)
200,000 200,000 200,000 200,000
(66,667) (66,667) (66,667) (66,667)
333,333 333,333 333,333 333,333
(150,000) (150,000) (150,000) (150,000)
183,333 183,333 183,333 183,333
66,667 66,667 66,667 66,667
250,000 250,000 250,000 550,000
122,000 122,000 (178,000) 550,000
0.4523 0.4039 0.3606 0.3220
55,187 49,274 (64,189) 177,085
276,000 398,000 220,000 770,000
(38,234) 11,039 (53,149) 123,936
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Tax 45%
WACC 12%
2004 2005 2006 2007 2008 2009 2010 2011
Years 0 0 1 2 3 4 5 6
Nett Investment
Equipment 1 Cost (600,000)Equipment 2 Cost ###
Sell old Machine -
Tax reduction sell below NBV 180,000
(820,000)
Operating Cash Flow
Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)
Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)
Direct cost (labor) (900,000) (700,000) (700,000) (700,000) (700,000) (700,000) (700,000)Depreciation 2 (333,333) (133,333) (66,667) (66,667) (66,667) (66,667)
Depreciation (60,000)
EBIT ### 66,667 266,667 333,333 333,333 333,333 333,333
Tax (30,000) (120,000) (150,000) (150,000) (150,000) (150,000)
Nett Income ### 36,667 146,667 183,333 183,333 183,333 183,333
Add depreciation 60,000 333,333 133,333 66,667 66,667 66,667 66,667
### 370,000 280,000 250,000 250,000 250,000 250,000
Nett Casho Flow (600,000) ### 370,000 280,000 250,000 250,000 250,000 250,000
PV of 1 factor 1.00 1.00 0.89 0.80 0.71 0.64 0.57 0.51Present Value (600,000) ### 330,357 223,214 177,945 158,880 141,857 126,658
Accumulated Cash Flow ### ### ### ### (890,000) (640,000) (390,000)
Accumulated PV to CF ### ### ### ### ### ### (881,089)
Present Value 92,513
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Net Present Value (507,487)
Internal rate of return 5.02%
Profitability index 0.751
Payback Period 7.56
Discounted Payback 14.61
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2012 2013 2014 2015
7 8 9 10
2,000,000 2,000,000 2,000,000 2,000,000
(300,000) (300,000) (300,000) (300,000)
(600,000) (600,000) (600,000) (600,000)
(700,000) (700,000) (700,000) (700,000)(66,667) (66,667) (66,667) (66,667)
333,333 333,333 333,333 333,333
(150,000) (150,000) (150,000) (150,000)
183,333 183,333 183,333 183,333
66,667 66,667 66,667 66,667
250,000 250,000 250,000 250,000
250,000 250,000 250,000 250,0000.45 0.40 0.36 0.32
113,087 100,971 90,153 80,493
(140,000) 110,000 360,000 610,000
(768,002) (667,031) (576,879) (496,386)
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Tax 45%
WACC 12%
2004 2005 2006 2007 2008 2009 2010 2011
Years 0 0 1 2 3 4 5 6
Nett Investment
Equipment 1 Cost (600,000)Equipment 2 Cost ###
Sell old Machine 200,000
Operating Cash Flow
Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)
Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)
Direct cost (labor) (900,000) (700,000) (700,000) (700,000) (700,000) (700,000) (700,000)
Depreciation 2 (100,000) (100,000) (100,000) (100,000) (100,000) (100,000)Depreciation (60,000) (60,000)
EBIT (860,000) 440,000 300,000 300,000 300,000 300,000 300,000
Tax (198,000) (135,000) (135,000) (135,000) (135,000) (135,000)
Tax reduction sell below NBV 90,000
Nett Income (860,000) 332,000 165,000 165,000 165,000 165,000 165,000
Add depreciation 60,000 160,000 100,000 100,000 100,000 100,000 100,000
(800,000) 492,000 265,000 265,000 265,000 265,000 265,000
Nett Cash Flow (600,000) (800,000) 492,000 265,000 265,000 265,000 265,000 265,000
PV of 1 factor 1.00 1.00 0.89 0.80 0.71 0.64 0.57 0.51Present Value (600,000) (800,000) 439,286 211,256 188,622 168,412 150,368 134,257
Accumulated Cash Flow ### (908,000) (643,000) (378,000) (113,000) 152,000 417,000
Accumulated PV to CF ### (960,714) (749,458) (560,836) (392,424) (242,056) (107,798)
Present Value 803,560
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Net Present Value 203,560
Internal rate of return 15.65%
Profitability index 1.145
Payback Period 4.43
Discounted Payback 6.90
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2012 2013 2014 2015
7 8 9 10
2,000,000 2,000,000 2,000,000 2,000,000
(300,000) (300,000) (300,000) (300,000)
(600,000) (600,000) (600,000) (600,000)
(700,000) (700,000) (700,000) (700,000)
(100,000) (100,000) (100,000) (100,000)
300,000 300,000 300,000 300,000
(135,000) (135,000) (135,000) (135,000)
165,000 165,000 165,000 165,000
100,000 100,000 100,000 100,000
265,000 265,000 265,000 265,000
265,000 265,000 265,000 265,0000.45 0.40 0.36 0.32
119,873 107,029 95,562 85,323
682,000 947,000 1,212,000 1,477,000
12,074 119,103 214,665 299,988
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