The company "T" analyzes the project for construction of a factory for the production of the product "H". This was made up of the following investments.
Table 1-investment plan for the construction of a factory for the production of the product "H".
Type of work Period Cost, ths. Rub.
The zero cycle of construction 0400
Construction of buildings 1800
Purchase and installation of equipment in February 1500
Formation of the working capital 3500
Production is scheduled to start production during the 4th year and continue to 13th inclusive. With the proceeds from the sale of products will be 1305 thousand. Rub. annually; variable and fixed costs - 250 thousand. rub. and 145 thousand. rub. respectively.
Start depreciation coincides with the beginning of operations, and will continue for 10 years straight-line method. By the end of the project life cycle of their cost is assumed to be zero, but the building can be sold for 400 thousand. Rub. It is also planned the release of working capital in the amount of 25% of the original level.
The cost of capital for the company is 13%, the tax rate - 20%.
1) Develop a plan for cash flow and make an assessment of the economic efficiency of the project.
2) How will the effectiveness of the project, if all else being equal time to market will be reduced to 2 years? Back up their conclusions relevant calculations.
The equipment of the "L" was bought 5 years ago for 95 000,00. His current net book value of 40 000,00. Regulatory lifespan is 15 years, after which it should be written off.
The new equipment of the "M" stands 160 000,00. Its installation will cost 15 000,00. The normative lifetime "M" is 10 years, after which its residual value is 0.
The introduction of the "M" requires additional working capital in the amount of 35 000,00. This is expected to increase annual revenue from 450 000,00 500 000,00, operating expenses 220 000,00 225 000,00.
The cost of capital for the company is 10% income tax rate - 20%. It uses straight-line method of depreciation.
1.Razrabotayte plan cash flows and make an assessment of the economic efficiency of the project.
2.Predpolozhim that by the end of the project life cycle working capital will be released in full. How will this condition on the overall efficiency of the project? Back up their conclusions relevant calculations.
Corporation "D" is considering two mutually exclusive projects "A" and "B". The project requires an initial investment in the amount of 190 thousand. Rub. and 160 thousand. rub. respectively. Managers of corporations use the method reliability coefficients in the analysis of investment risks. Expected cash flows and related factors of reliability are given below.
The discount rate for corporations is typically 8%. The coupon rate of return of 3-year government bonds - 5%.
1. Define the criteria NPV, IRR, PI for each project based on the real values \u200b\u200bof cash flows.
2. Criteria for the NPV, IRR, PI projects for risk-free equivalents cash flows.
3. What project would you recommend to take? Why is that?