Question

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Find NPV, Payback, and Yearly BE

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We are that the SPECTRO ARCOS" P o le en The SPECTRO GENESIS 102-05 pec h complete set of bactory listed for e n c imi sa pla c e ist der SPECTROBLUE SPECTRO S T ORES SPECTROLLEC C OES to be des c omptes Cost of Capital 9.00% Cost of the Prosed -S356,750.00 Revenue Year 1 Year 2 Year Year 4 $94,500.00 $125,000.00 $129,650.00 5202500.00 $250 555.00 $175.500.00 $135.000.00 Years Year 5 Year? NPVA

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Answer 1

a. NPV of the project Discounted Cash flows ($) (d) = (b) * (c) Year Cash inflows PV @ 9% (a) (b) 1 94,500.00 $1,25,000.00 (c) $ 86,656.50 0.917 2 0.842 1,05,250.00 $1,29,650.00 3 0.772 1,00,089.80 4 $2,02,500.00 $ 1,43,370.00 1,62,860.75 0.708 5 $ 2,50,555.00 0.65 $1,75,500.00 6 0.596 1,04,598.00 $1,35,000.00 0.547 7 73,845.00 $ $ $ Total inflows 7,76,670.05 Initial Cost 3,56,750.00 NPV 4,19,920.05 b. Payback period of the project Cashflow Net Invested Cash Year $ -3,56,750.00 0 1 94,500.00 2 $1,25,000.00 $1,29,650.00 $2,02,500.00 5$2,50,555.00 6 $1,75,500.00 7 $1,35,000.00 $ -2,62,250.00 -1,37,250.00 7,600.00 3 4 1,94,900.00 $ 4,45,455.00 6,20,955.00 7,55,955.00 The payback period will be between 3 & 4 Year The period required to recover $194,900 will be (194900/202500* 12) 11.5 or 12 months The payback period for Project shall be 3.11 or 4 years Note Net Invested Cash Initial cash outlay Cash Inflow each year. c.Yearly BE BE is Break Even Revenue. In capital budgeting BE refers to the number of sales to be made to recover the fixed costs Fixed Costs(in $ Cash Flows(Discounted) ($) Break Even Sales(in Qty.) (d) = (b)/(c) Year (a) (b) (c) 246,000 86.656.50 1 2.84 2 246,000 1,05,250.00 2.34 1,00,089.80 3 246,000 2.46 4 246,000 1,43,370.00 1.72 246,000 5 1,62,860.75 1.51 6 246.000 1,04,598.00 73,845.00 2.35 7 246,000 3.33