Statement for the calculation of Annual Cash flow |
|||
Annual revenue |
25,000 |
35,000 |
30,000 |
Less Annual expenses |
4,000 |
6,500 |
6,000 |
Operating income |
21,000 |
28,500 |
24,000 |
Add Depreciation expenses |
33,333 |
35,000 |
20,833 |
Annual cashflow |
54,333 |
63,500 |
44,833 |
Project A |
Project B |
Project C |
||||||
Particular |
Time |
PVF@15% |
Amount |
PV |
Amount |
PV |
Amount |
PV |
Cash outflow |
100,000 |
100,000 |
140,000 |
140,000 |
125,000 |
125,000 |
||
Present value of cash outflow |
100,000 |
140,000 |
125,000 |
|||||
Cash inflow |
||||||||
(1-3) |
2.2832 |
55,433 |
79912 |
|||||
(1-4) |
2.8549 |
35,000 |
99921.5 |
|||||
(1-6) |
3.7845 |
44,833 |
169670.5 |
|||||
Present value of cash inflow |
79912 |
99921.5 |
169670.5 |
|||||
Net present value |
-20,088 |
-40,079 |
44,670 |
So from all of the above Project C is best as it has positive and maximum Net present value.
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