net cash flow, Finance Basics

Assignment Help:
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)

Related Discussions:- net cash flow

Example of capital asset pricing model, Example of Capital Asset Pricing Mo...

Example of Capital Asset Pricing Model KK Ltd is an all equity firm whose Beta factor is 1.2, the interest rate on T. bills is currently at 8.5% and the market rate of return

Effective reach and effective frequency-insurance , Before purchasing insur...

Before purchasing insurance we have to go through different factors. Among different important factors there are two most crucial aspects we should consider before buying insurance

Optimal Capital Budgeting, Capital Corporation, which has a target capital ...

Capital Corporation, which has a target capital structure of 40 percent debt and 60 percent common equity, is evaluating an expansion project with an 8.5 percent IRR. The project c

Becoming a tutor, How to become a tutor in this platform?

How to become a tutor in this platform?

Assignment, Discuss the applicabilty of such cycle to poultry business(cons...

Discuss the applicabilty of such cycle to poultry business(consider broilers)

Head office and branch or subsidiary, Head Office and Branch or Subsidiary ...

Head Office and Branch or Subsidiary MNC has diverse operations set up in dissimilar geographical locations. The HQ acts like the principal and the subsidiary like an agent he

Standard ratio analysis-compound growth rates, Standard ratio analysis shou...

Standard ratio analysis should be used to supplement the discussion of strength and weakness. The following ratios are most often used by practitioners: (a) Growth Rates: PEG R

Risk-return trade-off, Risk-Return Trade-Off Most financial decisions ...

Risk-Return Trade-Off Most financial decisions comprise alternative courses of action. The choices have different returns and risk.  As like example, must we buy a replacement

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd