Question

Imagine that you own (250,000$) and you want to invest it in your dream plan. estimate the initial cost and the annual cash flow details (operation and maintenance costs, raw material, salaries, overheads, profits …etc.).(draw the cash flow)

Note: you don’t need to consume the 250,000$, any cheaper investments are fine. Any larger investment is allowable under loan consideration or suitable explanation.

It’s like a mini feasibility study but you only have to calculate the rate of return

Note: put your solution in two printed pages.

show the used interest rate

Answer 1

INVESTMENT IN PLANT	240000
USEFUL LIFE	4 YEARS
SALVAGE VALUE	0
DISCOUNTING RATE	10%
DEPRECIATION =	INTITAL INVEST/ NO. OF YEARS
DEPRECIATION =	240000/4
DEPRECIATION =	60000
CASH INFLOW
PARTICULARS	1ST YEAR	2ND YEAR	3RD YEAR	4TH YEAR
NO. OF UNITS SOLD	5000	5200	5500	5800
SALES PRICE PER UNIT	100	100	100	100
SALES REVENUE	500000	520000	550000	580000
RAW MATERIAL @50	250000	260000	275000	290000
SALARIES	50000	52000	55000	58000
VARIABLE OVERHEAD	50000	52000	55000	58000
10RS PER UNIT
FIXED COST	50000	50000	50000	50000
LESS DEPN	60000	60000	60000	60000
PROFIT	40000	46000	55000	64000
ADD DEPN	60000	60000	60000	60000
CASH FLOW	100000	106000	115000	124000
YEAR	CASH FLOW	DIS @10%	DIS CASH FLOW
0	-240000	1.00	-240000.00
1	100000	0.91	90909.09
2	106000	0.83	87603.31
3	115000	0.75	86401.20
4	124000	0.68	84693.67
		NPV	109607.27
RATE OF REUTNR =	RETURN / INVESTMENT
RATE OF REUTNR =	109607/240000
RATE OF REUTNR =	45.67%