Question

A new chemical plant will be constructed. The following data is used for this construction. Using this data;

1. Draw the Cumulative Cash Flow Diagram for Nondiscounted and Discounted after-tax cash flows.
2. Define the profitability criteria for each Cash Flows (Nondiscounted and Discounted)
3. Calculate and show, PBP, CCP, CCR, ROROI, DPBP, NPV, DCFROR on the Cash Flow Diagram.

DATA:

Cost of Land, L           : 5x10⁶ TL

FCI, during year 1       : 7x10⁶ TL

FCI, during year 2       : 30x10⁶ TL

FCI, during year 3       : 50x10⁶ TL

Plant start-up at the end of year 3

Working Capital          : 20x10⁶ TL at the end of year 3

Yearly sales revenue (after start-up) : R = 80 x10⁶ TL per year

Cost of Manufacturing excluding depreciation allowance(after start-up):

COM =40 x10⁶TL per year

Taxation rate, t = 30%

Salvage value of the plant, S = 5x10⁶ TL

Total Project life : 8 years

Depreciation: Use 3 years after start-up

Depreciation = d = (FCI-Salvage value)/n

Discount rate = 20%

CCR= 1 + (CCP/(Land+WC+FCI_L) or

CCR = (sum of all positive cash flows/ sum of all negative cash flows)

ROROI = Average annual net profit/ FCI_L

PVR = (present value of all positive cash flows/ present value of all negative cash flows)

Net Profit = (R-COM-d)(1-t)+d

Answer 1