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the amount of total income, outcomes, working capital and the indicators of success of the
company.
Romanian fiscal law provides the next rule of calculating the Net Profit:
Income Tax = Profit Tax Rate * Taxable Profit = Profit Tax Rate * (Total Income - Total
Expenses - Non-Taxable Income + Non-deductible Expenses);
1.Cash Flow
Cash flow= Working capital- Total taxes
2.Oportunity cost
The initial investment in the company was 70 000 euro, untill the 5 years the company achieve
the value of Net Profit equal with 229992 euro, that mean that the company gains 159992 euro
producing and trading essencial oils.
Net Profit Initial Investment = Returns;
Returns = 229992 70000 = 159992(euro);
While if investors decided to place the money in a bank in condintions of 0.25% per year they
would have achieve the amount of 70879,38 m.u., that means that in 5 years they gains 879,38
m.u.
Sf= So(1+ q/100%)^n;
Sf- final amount of money;
So- initial sold;
q- rate of deposit;
n- number of years;
Sf=70000(1+0.0025)^5=70879,38 (m.u.);
Returns = Final amount - Initial Investment;
Returns = 879.38 (m.u.);
In this case is absolutely clear that the returns of investment in producing essencial oils is much
more than the money placement in a bank.
3.Returns on investment
For determinate the viability of the project for each following year a used next
formula:
22999270000
ROI ( total )= 100 =228,56
70000
NB! In both formula I used as a Incomes after Investment the Net Profit for each folowing year
which can be reinvest in next stage of production and the as a Initial Investment the total amount
of all costs for economical activity of the company.
4.Net Present Value
In the next table is represent the total amount of all inflows( incomes) and of all outflows(costs).
The diference between these 2 values is the Net Present Value.
Year 2013 2014 2015 2016 2017
Inflows 312900 371315 384210 399900 416400
Outflows 62900 86315 94210 104900 106400
Net present Value 250000 285000 290000 295000 310000
Tabel 7 The Net Present Value for each following year
Figure 3: The evolution of the Net Present Value for each following year.
Also
Internal rate of return (IRR) is a metric used in capital budgeting measuring the profitability of
potential investments. Internal rate of return is a discount rate that makes the net present value
(NPV) of all cash flows from a particular project equal to zero. IRR calculations rely on the same
formula as NPV does.
The following is the formula for calculating NPV:
where:
To calculate IRR using the formula, one would set NPV equal to zero and solve for the discount
rate r, which is here the IRR. Because of the nature of the formula, however, IRR cannot be
calculated analytically, and must instead be calculated either through trial-and-error or using
software programmed to calculate IRR.
6. Payback
Proceeding from that fact that the initial investment was 70000 m.u. and the net profit in first
year is 184880 m.u., the payback period is less than 1 year, more exactly over 8 months. Not
considered the Time Value of Money.