Assignment 2

1)

2)

Assignment 2

Discounting Problem
Table 1. Net Cash flows of Benefits for project 1
Year

2006

2007

2008

2009

2010

2011

2012

2013

2014

2006

2007

2008

2009

2010

2011

2012

2013

2014

2006

2007

2008

2009

2010

2011

2012

2013

2014

Net Benefits
Table 2. Net Cash flows of Benefits for project 2
Year
Net Benefits

1)
Year
Interest Rate as of beginning of the Year

Project1

2006

2007

2008

2009

2010

2011

2012

2013

2014

PV as of year 2006

NPV

PV as of year 2008

NPV

PV as of year 2012

NPV

Project2

2006

2007

2008

2009

2010

2011

2012

2013

2014

PV as of year 2006

NPV

PV as of year 2009

NPV

PV as of year 2011

NPV

Year

2006

2007

2008

2009

2010

2011

2012

2013

2014

2006

2007

2008

2009

2010

2011

2012

2013

2014

Interest Rate as of beginning of the Year

Project1
PV as of year 2006

NPV

PV as of year 2008

NPV

PV as of year 2012

NPV

Project2

2006

2007

2008

2009

2010

2011

2012

2013

2014

PV as of year 2006

NPV

PV as of year 2009

NPV

PV as of year 2011

NPV

NPV2006 =
NPV2008 =
NPV2012 =

NPV2006 =
NPV2008 =
NPV2011 =

NPV2006 =
NPV2008 =
NPV2012 =

NPV2006 =
NPV2008 =
NPV2011 =

Alternative Investment Criteria

Problem 1: *SURUCHI vs. GROFAST*
Table of Parameters for SURUCHI
Project Duration
Publicity Expenditure
Sales Revenue
Sales Growth
Miscellanous income
miscellanous income growth

9
10000
12210
9%
3900
6%

years
USD
USD
USD
-

Revenues (USD)
Year
Sales Revenue
Miscellaneous Income
Total Cash inflow

12,210 USD
3,900
16,110

3
13308.9
4134
17,443

14506.7
4,382.0
18,889

Costs, Operating Expenses for SURUCHI (USD)

Year
Publicity(Advertisement)
Raw Materials
Labor
Supervision
Other Expenses
Total Expenses (Cash outflow)

Net Cashflow
NPV @ 6% discount rate
IRR

10000

8400

8946

9527

6590
177
855
-6,022

6854

7128

188
932

199
1016

973

1,185

10,088

16,470

17,704

Table of Parameters for GROFAST

Project Duration
Publicity Expenditure
Sales Revenue
Sales Growth
Miscellanous income
miscellanous income growth

7
15000
10356
15%
2300
8%

years
USD
USD
USD
-

Revenues (USD)
Year
Sales Revenue
Miscellaneous Income
Total Cash inflow

10,356
2,300
12,656

11,909
2,484
14,393

13,696
2,683
16,379

Costs, Operating Expenses for GROFAST(USD)

Year
Publicity(Advertisement)
Raw Materials
Labor
Supervision
Other Expenses
Total Expenses (Cash outflow)

Net Cashflow
NPV @ 6% discount rate
IRR

2
15,000
4,600
7,700
69
828
28,197

3
4991
8,008
75
952

8,328
81
1,095

Expenditure Growth Estimations for SURUCHI

Raw Materials
Labor
Supervision
Other Expenses

USD
8,400 USD
6590
177
855

growth (%)
6.50%
4%
6%
9%

15812.3
4,645
20,457

17235.4
4,924
22,159

7
18786.6
5,219
24,006

10147

10806

7413

7709

211
1107

Discount rate

6%

8
20477.4
5,532
26,010

9
22320.4
5,864
28,185

24329.2
6,216
30,545

223
1207

11509
8018
237
964

12257
8338
251
1050

13053
8672
266
1145

13902
9019
282
1248

1,416

1,667

2,291

2,617

2,971

3,353

19,041

20,492

21,715

23,392

25,214

27,192

Expenditure Growth Estimations for GROFAST

Raw Materials
Labor
Supervision
Other Expenses

4
15,750
2,897
18,648

USD
4600
7700
69
828

growth (%)
8.5%
4%
9%
15%

18,113
3,129
21,242

8,661
88
1,259

20,830
3,379
24,209

9,008
96
1,448

Discount rate

23,954
3,650
27,604

9,368
104
1,665

6%

27,547
3,942
31,489

9,743
113
1,915

31,679
4,257
35,936

10,133
123
2,202

10,538
134
2,533