- For the following pieces of information, determine the value that each must have in order to get a NPV of zero
- The growth rate of sales at 15%
- The Sales revenue of 2016 at $51
- The initial cost of the equipment at $32
- The proceeds of disposition of equipment at $22
- A margin error in percentage applied to the variable production cost of the five years
Exhibit 2: Operating projections of Disposable syringes (INR in Million) 2015 2016 2017 2018 2019 2020 Revenue 51.00 59 67 78 89 Revenue Growth 15% 15% 15% 15% Production Costs Fixed Production Expense (excl depreciation) 5.20 6.27 7.65 8.15 8.96 Variable Production Costs 26.80 27.85 35.00 37.52 40.85 2.55 2 2.39 2.63 2.89 34.55 36.03 45.04 48.30 52.70 Depreciation Total Production Costs Selling, General & Administrative Total Operating Expenses 4.00 1.25 1 1.59 1.75 1.93 4.00 35.80 37.31 46.63 50.05 54.63 Operating Profit -4.00 14.14 21.34 20.82 27.51 34.57 Working Capital Assumptions: Minimum Cash Balance as % of Sales 5.0% 5.0% 5.0% 5.0% 5.0% 60.0x 60.0x 60.0x 60.0x 60.0x Days Sales Outstanding Inventory Turnover (prod. cost/ending inv.) Days Payable Outstanding (based on tot. op. exp.) 25.0x 25.0x 25.0x 25.0x 25.0x 45.0x 45.0x 45.0x 45.0x 45.0x Capital Expenditure 70.00 4.08 3.19 3.98 4.38 4.82 3) For the following pieces of information, determine the value that each must have in order to get a NPV of zero a. The growth rate of sales at 15% b. The Sales revenue of 2016 at $51 C. The initial cost of the equipment at $32 d. The proceeds of disposition of equipment at $22 A margin error in percentage applied to the variable production cost of the five years e. 0 1 2 3 4 5 2016 2017 2018 2019 2020 2015 -23,000,000 2,427,516.15 21,000,000 2,241,086.59 18,758,913.41 Year Initial cost building PV of CCA tax shield Disposal building PV of CCA Tax shield Total CF Initial cost equipment PV of CCA tax shield (to) Disposal equipment PV of CCA tax shield (t5) Total CF Initial cost Land (20,572,483.85) -32,000,000 7,160,895.30 22,000,000 4,751,619.87 17,248,380.13 (24,839,104.70) (15,000,000.00) Disposal Land 20,000,000 Total CF Total totaux PV (TO) TOTAL PV (TO) Operating CF PV (TO) NPV(9.316%) IRR (15,000,000.00) (60,411,588.54) (60,411,588.54) (21,903,346.41) (60,411,588.54) 20,000,000 56,007,294 38,508,242.13 138,082.19 126,314.66 12,483,260.27 10,446,244.35 11,475,027.40 8,784,194.89 15,644,178.08 10,955,118.01 86,917,389.43 55,678,440.17 25,578,723.53 18.79% Exhibit 2: Operating projections of Disposable syringes (INR in Million) 2015 2016 2017 2018 2019 2020 Revenue 51.00 59 67 78 89 Revenue Growth 15% 15% 15% 15% Production Costs Fixed Production Expense (excl depreciation) 5.20 6.27 7.65 8.15 8.96 Variable Production Costs 26.80 27.85 35.00 37.52 40.85 2.55 2 2.39 2.63 2.89 34.55 36.03 45.04 48.30 52.70 Depreciation Total Production Costs Selling, General & Administrative Total Operating Expenses 4.00 1.25 1 1.59 1.75 1.93 4.00 35.80 37.31 46.63 50.05 54.63 Operating Profit -4.00 14.14 21.34 20.82 27.51 34.57 Working Capital Assumptions: Minimum Cash Balance as % of Sales 5.0% 5.0% 5.0% 5.0% 5.0% 60.0x 60.0x 60.0x 60.0x 60.0x Days Sales Outstanding Inventory Turnover (prod. cost/ending inv.) Days Payable Outstanding (based on tot. op. exp.) 25.0x 25.0x 25.0x 25.0x 25.0x 45.0x 45.0x 45.0x 45.0x 45.0x Capital Expenditure 70.00 4.08 3.19 3.98 4.38 4.82 3) For the following pieces of information, determine the value that each must have in order to get a NPV of zero a. The growth rate of sales at 15% b. The Sales revenue of 2016 at $51 C. The initial cost of the equipment at $32 d. The proceeds of disposition of equipment at $22 A margin error in percentage applied to the variable production cost of the five years e. 0 1 2 3 4 5 2016 2017 2018 2019 2020 2015 -23,000,000 2,427,516.15 21,000,000 2,241,086.59 18,758,913.41 Year Initial cost building PV of CCA tax shield Disposal building PV of CCA Tax shield Total CF Initial cost equipment PV of CCA tax shield (to) Disposal equipment PV of CCA tax shield (t5) Total CF Initial cost Land (20,572,483.85) -32,000,000 7,160,895.30 22,000,000 4,751,619.87 17,248,380.13 (24,839,104.70) (15,000,000.00) Disposal Land 20,000,000 Total CF Total totaux PV (TO) TOTAL PV (TO) Operating CF PV (TO) NPV(9.316%) IRR (15,000,000.00) (60,411,588.54) (60,411,588.54) (21,903,346.41) (60,411,588.54) 20,000,000 56,007,294 38,508,242.13 138,082.19 126,314.66 12,483,260.27 10,446,244.35 11,475,027.40 8,784,194.89 15,644,178.08 10,955,118.01 86,917,389.43 55,678,440.17 25,578,723.53 18.79%
