Scribd
Upload
9 views1 page

Net Cash Flow Analysis for Project

The document is an excerpt from a financial management textbook that provides details about a potential project for a firm to consider, including initial costs, project life, annual sales estimates, unit pricing, costs, depreciation, and tax rates. It asks the reader to build an Excel model to calculate the net cash flow under optimistic and pessimistic scenarios based on variations in the parameter estimates provided.

Uploaded by

Jithin Mohan
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
9 views1 page

Net Cash Flow Analysis for Project

The document is an excerpt from a financial management textbook that provides details about a potential project for a firm to consider, including initial costs, project life, annual sales estimates, unit pricing, costs, depreciation, and tax rates. It asks the reader to build an Excel model to calculate the net cash flow under optimistic and pessimistic scenarios based on variations in the parameter estimates provided.

Uploaded by

Jithin Mohan
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Taken From: Financial Management Book

Author: Sumit Gulati


Publisher: McGraw Hill Education

Q: A firm is considering a project for which the following details have been estimated:

• Initial Cost: Rs 50,000


• Life of the project: 5 Years
• Annual Sales (Units): 5,000
• Unit Price: Rs 70
• Variable Cost Per Unit (VCPU): Rs 10
• Fixed Cost: Rs 20,000
• Depreciation: Rs 10,000 in all years
• Tax Rate: 30%

Salvage Value is assumed to be zero.


Find out the net cash flow under the following scenarios: (Build an Excel Model)

Parameter Pessimistic Optimistic

Initial cost (Rs) 50,000 50,000

Life of the project 5 5

Annual sales (units): 2,000 8,000

Unit price (Rs) 40 80


Variable cost per unit (VCPU)
40 8
(Rs)
Fixed cost (Rs) 40,000 18,000

Depreciation every year 10,000 10,000

Tax Rate 30% 30%

You might also like