Answer?

Mon Dec 28 2020761938 AM marks. A4 solution sheet should have Answer Summary Box at the end of this full question with a decision recommendation note for each technique and finally Accept/Reject decision for Floxin project. . Modern Pharma is considering the manufacture of a new drug, Floxin, for which the following information has been gathered Floxin is expected to have a product life cycle of seven years and after that it would be withdrawn from the market. The sales from this drug are expected to be as follows: Floxin Year 1 2 3 5 6 7 Sales Rs. In million 80 120 160 200 160 120 80 The capital equipment required for manufactuning Floxin is? 120 million and it will be deprecated at the rate of 25 percent per year as per the WDV method for tax purposes. The expected net salvage value after seven years is 25 mdhon The working capital requirement for the project is expected to be 25 percent of sales. Working capital level 15 adjusted at the beginning of the year in relation to the projected sales for the year. At the end of 7 years, working capital is expected to be liquidated at par, baring an estimated loss of ? 4 million on account of bad debt which, of course, will be a tax-deductible expense. The accountant of the firm has provided the following estimates for the cost of Floxin: Raw material cost. 30% of sales Vanable manufacturing cost: 10% of sales Fixed annual operating and maintenance costs: 10 million Variable selling expenses: 10% of sales adjusted at the beginning of the year in relation to the projected sales for the year. At the end of 7 years, working capital is expected to be liquidated at par, barning an estimated loss of 4 million on account of bad debt wuch, of course, will be a tax-deductible expense The accountant of the firm has provided the following estimates for the cost of Floxin Raw material cost: 30% of sales Variable manufacturing cost: 10% of sales Fixed annual operating and maintenance costs: ? 10 million Vanable selling expenses: 10% of sales Overhead allocation excluding depreciation, maintenance, and interest: 10% of sales . The incremental overhead attnbutable to the overhead are, however, expected to be only 5 percent of sales. The manufacture of Floxin will cut into the sales of an existing product thereby reducing its contribution margin by 10 million per year The tax rate for the firm is 30 percent. Estimate the post-tax incremental cash flows for the project to manufacture Floxin. Input your rower in the respective cells. For eg Rs.10.20 million to be typed as 10.20. Negative cashflows en Rs. 10. 20 million to be typed in as 10.20. DONT round up or down. Maintain accuracy atleast upto 2 decimal values PBT or Accounting Profit NCF or Net Cash Flows Input your answer in the respective cells Foro 10.20 on to be typed as 10.30. Negative cashrowse 10.20 million to le typed in as 10.20. DONT round up or down Mamta accuracy atleast upto 2 decimal values NCF or Net Cash Flows PBT or Accounting Profit in millions of Rs. in millions of Rs. Year Negative values should start with Negative values should start with 0 not applicable million 1 RS million Rs. million 2 Rs. million Rs. million 3 Rs. million million 4 Rs. million Rs. million Rs. million Rs. million 6 Rs. million RS. million Rs. million Rs. million 5 Rs. million Rs. million 6 Rs. million Rs. million 7 Rs. million Rs. million After answering the above, note down the Profit After Tax and Net Cash Flows, proceed to the next 6 sub-question(s) to compute the other appraisal techniques one after another in sub-questions asking for Payback period, ARR, NPV, IRR. P.1, and MIRR Finally, you need to give the answer summary box with all 6 capital budget techniques and decision recommendation note to ACCEPT/REJECT in your solution A4 sheets at the end. Mon Dec 28 2020761938 AM marks. A4 solution sheet should have Answer Summary Box at the end of this full question with a decision recommendation note for each technique and finally Accept/Reject decision for Floxin project. . Modern Pharma is considering the manufacture of a new drug, Floxin, for which the following information has been gathered Floxin is expected to have a product life cycle of seven years and after that it would be withdrawn from the market. The sales from this drug are expected to be as follows: Floxin Year 1 2 3 5 6 7 Sales Rs. In million 80 120 160 200 160 120 80 The capital equipment required for manufactuning Floxin is? 120 million and it will be deprecated at the rate of 25 percent per year as per the WDV method for tax purposes. The expected net salvage value after seven years is 25 mdhon The working capital requirement for the project is expected to be 25 percent of sales. Working capital level 15 adjusted at the beginning of the year in relation to the projected sales for the year. At the end of 7 years, working capital is expected to be liquidated at par, baring an estimated loss of ? 4 million on account of bad debt which, of course, will be a tax-deductible expense. The accountant of the firm has provided the following estimates for the cost of Floxin: Raw material cost. 30% of sales Vanable manufacturing cost: 10% of sales Fixed annual operating and maintenance costs: 10 million Variable selling expenses: 10% of sales adjusted at the beginning of the year in relation to the projected sales for the year. At the end of 7 years, working capital is expected to be liquidated at par, barning an estimated loss of 4 million on account of bad debt wuch, of course, will be a tax-deductible expense The accountant of the firm has provided the following estimates for the cost of Floxin Raw material cost: 30% of sales Variable manufacturing cost: 10% of sales Fixed annual operating and maintenance costs: ? 10 million Vanable selling expenses: 10% of sales Overhead allocation excluding depreciation, maintenance, and interest: 10% of sales . The incremental overhead attnbutable to the overhead are, however, expected to be only 5 percent of sales. The manufacture of Floxin will cut into the sales of an existing product thereby reducing its contribution margin by 10 million per year The tax rate for the firm is 30 percent. Estimate the post-tax incremental cash flows for the project to manufacture Floxin. Input your rower in the respective cells. For eg Rs.10.20 million to be typed as 10.20. Negative cashflows en Rs. 10. 20 million to be typed in as 10.20. DONT round up or down. Maintain accuracy atleast upto 2 decimal values PBT or Accounting Profit NCF or Net Cash Flows Input your answer in the respective cells Foro 10.20 on to be typed as 10.30. Negative cashrowse 10.20 million to le typed in as 10.20. DONT round up or down Mamta accuracy atleast upto 2 decimal values NCF or Net Cash Flows PBT or Accounting Profit in millions of Rs. in millions of Rs. Year Negative values should start with Negative values should start with 0 not applicable million 1 RS million Rs. million 2 Rs. million Rs. million 3 Rs. million million 4 Rs. million Rs. million Rs. million Rs. million 6 Rs. million RS. million Rs. million Rs. million 5 Rs. million Rs. million 6 Rs. million Rs. million 7 Rs. million Rs. million After answering the above, note down the Profit After Tax and Net Cash Flows, proceed to the next 6 sub-question(s) to compute the other appraisal techniques one after another in sub-questions asking for Payback period, ARR, NPV, IRR. P.1, and MIRR Finally, you need to give the answer summary box with all 6 capital budget techniques and decision recommendation note to ACCEPT/REJECT in your solution A4 sheets at the end