Note:

All figures are in rupees

Plan 1
Plan 2
Plan 3

Less:

Less:

Less:
Less:
Add:

Particulars
Unit Selling Price
Estimated Volume to be sold
Estimated Annual Sales
Cost of material
Conversion Cost
Contribution
Fixed Costs
Supervision
Taxes and Insurance
Maintenance
Lease
PBDT
Depreciation
PBT
Taxes
PAT
Depreciation
CFAT

Leasing a general purpose instrument

Purchasing a general purchase instrument
Purchasing a special purpose equipment
Plan 1

Plan 2

Plan 3

50
40,000
2000000
720000
660000
620000

50
40,000
2000000
720000
660000
620000

50
40,000
2000000
680000
560000
760000

160000

160000
30000
30000

180000
50000
20000

400000
170000
230000
92000
138000
170000
308000

510000
270000
240000
96000
144000
270000
414000

400000
60000
60000
24000
36000
36000

Calculation of Present Value of Cash Inflows at 10%

Plan 1
Plan 2
Plan 3
Present factor of Annuity at 10%
3.791
3.791
3.791
Present value of Cash Inflows
136476
1167628
1569474
Scrap Value
0
400000
300000
Year 5
0.620921
0.620921
0.620921
Present Value of Scrap Value
0.0000
248368.5292 186276.3969
Total Present Value of Cash Inflow
136476
1415997
1755750

Calculation of Present value of Cash Outflow at 10%

Year
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5

Year 0
Year 1
Year 2
Year 3
Year 4
Year 5

Plan 1
0
0
0
0
0
Present Value factor at 10%
1
0.909091
0.826446
0.751315
0.683013
0.620921

Present value of Cash Outflow

Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Total Present Value Of Cash Outflow
Net Present Value
Profitabilty Index
Cash Outlay
Scrap Value
Working Capital
Average Investment
Average PAT
Average rate of Return(%)
Total Investment
Payback period(In years)

Cash Outflows
Plan 2
Plan 3
1250000
1650000
0
0
0
0
0
0
0
0
0
0

1
0.909091
0.826446
0.751315
0.683013
0.620921

1
0.909091
0.826446
0.751315
0.683013
0.620921

0
0
0
0
0
0
0
136476

1250000
0
0
0
0
0
1250000
165997

1650000
0
0
0
0
0
1650000
105750

0.00

1.13

1.06

0
0
0
0
36000
0

1250000
400000
0
1250000
138000
11.04

1650000
300000
0
1650000
144000
8.727272727

0
0.00

1250000
4.06

1650000
3.99

Note:
All figures are in millions
Particulars
Figures(In millions)
Particulars
Figures
Fixed Assets
$4,000.00 Interest Rate
10%
Current Assets
$1,000.00 PE ratio
10
Debt
$2,500.00 Beta value
1.2
Equity(Equity+Retained earnings)
$2,500.00 Treasury Bond Rate
8%
Market Value of Debentures
$2,000.00 Tax Rate
40%
No of Shares
50.00 Market Risk Premium
5.50%
Market Price of Shares
$4,000.00 Market price(1 share)
$80.00
Equity share capital
$2,300.00 Face Value(1 share)
$50.00
Retained Earnings
$200
Dividend per share
$4.00
Debt Equity Ratio(Book value)
1.00
Debt Equity Ratio(Market value)
0.5
Debt/(Debt+Equity ratio(Book value)
0.50
Debt/(Debt+Equity ratio(Market value)
$0.32
Calcultation of After Tax cost of Debt
Interest Amount
$250.00
Net Proceeds
$2,500.00
Cost of Debt(Before Tax)
10.00%
Cost of Debt(After tax)
6.00%
Calculation of cost of Firm's equity share capital
Capital asset pricing model
Market risk
13.500%
Cost of equity
14.600%
Dividend Per share
$4
Earnings per share
$8
Retained earning per share
$4
Total Retail Earnings(Book Value)
$200.00
Total Retail Earnings(Market Value)
$347.83

Particulars
Debt
Equity
Retained Earnings

Cost of Capital(%,
Book
Weights(Book
book
value
value) Value)
Market Value
6.00% #
0.5
$2,000.00
14.60% #
0.46
$4,000.00
14.60% #
0.04
$347.83
#
1
$6,347.83

Price earning ratio

10
Market price of equity $80
shares
EPS
$8
PAT
$400.00
Taxes
$266.67
EBT
$666.67
Interest
$250
EBIT
$916.67
DFL
1.375

Weights(Market
Weighted
value) Average
Weighted
cost
Average
of capital(Book
cost of capital(Market
Value)
Value)
0.315068493
3 1.890410959
0.630136986
6.716
9.2
0.054794521
0.584
0.8
1
10.3 11.89041096