Financial Analysis



Financial Analysis

Incremental Cash Flows

 

Years

 

1

2

3

4

5

6

7

8

Revenue

950000

1500000

1500000

1500000

1500000

1500000

1500000

1500000

Cost

 

 

 

 

 

 

 

 

Direct Cost

427500

675000

675000

675000

675000

675000

675000

675000

Indirect incremental costs

95000

95000

95000

95000

95000

95000

95000

95000

Plant purchase

1500000

 

 

 

 

 

 

 

Depreciation

300000

300000

300000

300000

300000

 

 

 

Inventory and receivables

200000

 

 

 

 

 

 

 

 

2522500

1070000

1070000

1070000

1070000

770000

770000

770000

Operating Income before Tax

-1572500

430000

430000

430000

430000

730000

730000

730000

Tax @ 35%

-550375

150500

150500

150500

150500

255500

255500

255500

 

 

 

 

 

 

 

 

 

Operating Income after Tax

-1022125

279500

279500

279500

279500

474500

474500

474500

Add: Depreciation

300000

300000

300000

300000

300000

 

 

 

 

 

 

 

 

 

 

 

 

Net Cash Flows

-722125

579500

579500

579500

579500

474500

474500

474500

 

 

 

 

 

 

 

 

 

NPV

1746160

2642901

2327691

1980960

1599556

1180011

823512

431364

Payback period (P/B) and the net present value (NPV) for the project

NPV

 

Years

 

1

2

3

4

5

6

7

8

Net Cash Flows

-722125

579500

579500

579500

579500

474500

474500

474500

NPV

1746160

2642901

2327691

1980960

1599556

1180011

823512

431364

Net Present Value

It is the most widely used method by the academicians, investors and financial managers to compare and select from a pool of investments. Net present value (NPV) is calculated in monetary terms. This method works on the basis of the concept of time value of money. It means that one pound sterling after one year is worth less than the same amount of ...