Since the investment is financed partly by Equity and partly by Debt, we have to calculate Weighted Average Cost of Capital to use it as discount rate:
Nature | Amount | Proportion | Cost | Tax Rate | WACC |
Equity | 3,000,000 | 75% | 12% | 0.000% | 9.00% |
Debt | 1,000,000 | 25% | 8% | 30.000% | 1.40% |
4,000,000 | 100% | 10.40% |
Assuming After Tax Cash flows does not include Loan repayment
Year | Initial Investment | After Tax Cash Flows | Loan Repayment | CashFlow | [email protected]% | DCF |
0 | -4,000,000 | -4,000,000 | 1.0000 | -4,000,000.0 | ||
1 | 2,200,000 | -500,000 | 1,700,000 | 0.9058 | 1,539,855.1 | |
2 | 2,800,000 | -500,000 | 2,300,000 | 0.8205 | 1,887,077.3 | |
- | -573,068 | |||||
BaseCase NPV | Adjusted NPV |
Assuming After Tax cash flows include Loan repayment also:
Year | Initial Investment | After Tax Cash Flows | CashFlow | [email protected]% | DCF |
0 | -4,000,000 | -4,000,000 | 1.0000 | -4,000,000.0 | |
1 | 2,200,000 | 2,200,000 | 0.9058 | 1,992,753.6 | |
2 | 2,800,000 | 2,800,000 | 0.8205 | 2,297,311.5 | |
1,000,000 | 290,065 | ||||
BaseCase NPV | Adjusted NPV |
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