net cash flow, Finance Basics

Assignment:
Mr. Ali wants to start “Rent-A-Car” business. He wants to start this business with at least 20
cars. He estimates that the required investment for the business is Rs. 30 Million. He projects
that revenue (before tax and depreciation) from the business will be Rs. 6 Million for the first
year and it will keep on g rowing at a rate of 5% annually till the 10
th
year.
Some other information regarding the project is as follows:
? Annual depreciation will be Rs. 3 Million under the straight line method.
? Cost of capital is 10% while the rate of tax is 35%.
Suppose you are running a financial consultancy firm, Mr. Ali wants to get his project evaluated
by your firm. You have to suggest Mr. Ali about the feasibility of the project after applying
different capital budgeting techniques.
Requirement:
Keeping your task into consideration, provide answers to the following:
1. Calculate net cash flows for 10 years. (10 Marks)
2. Evaluate the project by using the following capital budgeting techniques:
a. Payback Period (The desired payback period is 5 years) (04 Marks)
b. Net Present Value (10 Marks)
c. Profitability Index (03 Marks)
Posted Date: 1/23/2013 7:20:21 AM | Location :







Related Discussions:- net cash flow, Assignment Help, Ask Question on net cash flow, Get Answer, Expert's Help, net cash flow Discussions

Write discussion on net cash flow
Your posts are moderated
Related Questions

Shareholders' wealth maximization - Objectives of Business Entity Shareholders' wealth maximization refers to maximization of the total present value of each decision made in

Why do several critics say the CAPM model is not suitable in an international setting? Please describe a way that the CAPM model could be adapted for international applications.

What are the Methods of Underwriting An underwriting agreement may take any of the below three forms: (i) Standing behind the issue: Under this method, underwriter guarant

Expectation Theory The theory states here that the yield curve depends on the expectation concerning with future inflation rates. The rate on long-term bonds will exceed, If i

Assignment Gary and Beth have accepted the asset allocation that you have given them, but are now looking to you to give them some advice on what stocks they should purchase. R

Cash and Bonus Issue - Dividend For a firm to pay cash dividends, it should contain adequate liquid funds.Though, under conditions of liquidity and financial constraints, a fi



Solutions to agency problem The bondholders might receive the following procedures to protect themselves from the process of the shareholders that might dilute the value of th