cf payback lol

8/13/2019 CF Payback lol

1/41

yr.0 1 2 3 4

horizon the period for which asset will live

-100000 30000 40000 40000 15000

1 how many years will it take for the investment to come back ?

cumulative flows 30000 70000 110000 125000

choose the year which overakes the investment

come to the previous year

ascertain what remains to be captured 30000

flows in the next year 40000

which means we need 30000/40000 of year 3

to cover th

0.75

2 years

we can rec

payback 2 Yrs 9 months


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advantages of this method disadvanta

amount -10000

a b

1 40000 40000 30000 30000

2 50000 90000 25000 55000

3 20000 110000 30000 85000

4 0 110000 40000 125000

5 0 110000 50000 175000

6 175000

a 2.5

b 3.4


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0 1 2 3 4

-100000 30000 40000 40000 15000

interest rate 13%

1 discount all inflows at the interest rate

2 cumulate the discounted fig.

3 find payback

1 26548.67 31325.87 27722.01 9199.781

2 26548.67


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investment 90000

yearly inflows 23000

horizon 7 years

Discounted payback ?

rate 14%

yr.0 -90000 flows cmlt

1 23000 20175.44 20175.44

2 23000 17697.75 37873.19

3 23000 15524.34 53397.54

4 23000 13617.85 67015.38

5 23000 11945.48 78960.86

6 23000 10478.49 89439.35

7 23000 9191.658 98631.01

at end of year 6 89439.35

to be covered 560.6471

dis flows in yr 7 98631.01

period in yr 7 0.060995

discounted payback 6.09 years


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1 2 3 4 5

-100000 30000 40000 40000 15000 20000

interest rate 13%

26548.67 31325.87 27722.01 9199.781 10855.2

PV of inflows 105651.5

Net present value method NPV method

PV of inflows to be compared with outlay(invesetment)

IF PV of inflows is greater than outlay accept

IF PV of inflows is less than outlay reject

investment -100000

PV of inflows 105651.5

so accepted!!

0 1 2 3 4 5

-100000 30000 40000 40000 15000 20000

interest rate 13%

excel's NPV 105651.53

NPV diff between the sum of inflows and the investment


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invst -100000

A B

1 40000 30000

2 50000 25000

3 20000 30000

4 0 40000

5 0 500006 55000

pv of inflows Rs. 85,740.12 Rs. 136,223.02

NPV -Rs. 14,259.88 Rs. 36,223.02

for A for B


10/41

NPV you need the interest rate called as

interest rate

hurdle rate

discounting rate

cost of capital

-100000 30000 25000 30000 40000 50000 55000

return the project

yr0 1 2 3 15%

50000 25000 25000 25000

0 21739.13 18903.59 16437.91

57080.63


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investment Rs. 560,000.00

1 80000 80000

2 80000 160000

3 80000 240000

4 80000 3200005 80000 400000

6 80000 480000

7 80000 560000 this year is payback year

8 80000 640000

9 80000 720000

10 80000 800000

11 80000 880000

12 80000 960000


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80000 yearly inflows

disc. Payback cumulative

1 80000 72072.07207 72072.072

2 80000 64929.79466 137001.867

3 80000 58495.3105 195497.177

4 80000 52698.47793 248195.6555 80000 47476.10624 295671.761

6 80000 42771.26689 338443.028

7 80000 38532.67287 376975.701

8 80000 34714.1197 411689.821 During the life of the d

9 80000 31273.98172 442963.803

10 80000 28174.7583 471138.561

11 80000 25382.66514 496521.226

12 80000 22867.26589 519388.492

extended period 13 80000 20601.14044 539989.632 at the end of 14

14 80000 18559.58598 558549.218 still remainin

15 80000 16720.34773 575269.566 portion in year 15

16 80000 15063.37634 590332.942 discounted payback

17 80000 13570.60931 603903.552


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iscounted payback cannot be achieved

558549.2

1450

0.08676

14.09 years


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0 1 2 3

-Rs. 1,000,000.00 Rs. 520,000.00 Rs. 365,000.00 Rs. 385,000.00

cumulative Rs. 520,000.00 Rs. 885,000.00 Rs. 1,270,000.00

afte 2 years Rs. 885,000.00

to be covered Rs. 115,000.00portion in year 0.2987

payback 2.30 years


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find npv of the problem 2

Rs. -40,611.51 NPV function


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a investment 450000

disc cumult.

1 75000 68807.34 68807.34

2 75000 63126 131933.3

3 75000 57913.76 189847.1

4 75000 53131.89 242979 a -34888.575 75000 48744.85 291723.8 b -256315.98

6 75000 44720.05 336443.9 c -16180.12

7 75000 41027.57 377471.5 d Rs. 1,358.58

8 75000 37639.97 415111.4

b c d only option d is viable

86000 500000 10000

86000 500000 10000

86000 500000 10000

86000 500000 10000

86000 500000

86000 500000

86000 500000

500000


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A Rs. 7,876,902.74 3000000

B 3000000

3000000

3000000

3000000

30000003000000


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9.50%

A 580000 Rs. 290,553.86

580000

580000

580000

680000

B 445000 Rs. 385,715.94

445000

445000

445000

645000

C 325000 Rs. 68,189.51

325000

325000

325000

475000


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A B

INITIAL INVESTMENT -5000000 -4850000

1 1380000 1256000

2 1450000 1256000

3 1460000 13120004 1524000 1312000

5 1400000 2060000

NPV Rs. 190,200.29 Rs. 209,258.81

IRR 13.51% 13.60%


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K L

-500 -350

150 125

175 175

200 225

NPV Rs. -97.00 Rs. 48.01

IRR 2.36% 20.97%


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s t

12 -538 -526

126 200

476 300

206 200

NPV Rs. 97.67 Rs. 31.67

IRR 21.83% 15.71%

Payback


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independent projects NPV+ve IRR>coc

NPV -ve irr


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16%

Project A Project B cost of capital

year 0 -450000 -590000 5%

1 197000 145000

2 147000 154000

3 97000 268000

4 97000 1420005 97000 118000

6 97000 99000

NPV Rs. 182,931.70 Rs. 202,441.42

IRR 19.01% 15.76%

NPV A NPVB

4% Rs. 200,868.93 Rs. 226,666.49 in mutually exclusive projects if co

5% Rs. 182,931.70 Rs. 202,441.42

6% Rs. 165,819.90 Rs. 179,314.73 go by the NPV decision

7% Rs. 149,484.23 Rs. 157,222.78

8% Rs. 133,878.86 Rs. 136,106.33 if cost>crossover rate

9% Rs. 118,961.22 Rs. 115,910.16 both NPV and IRR will agree with

10% Rs. 104,691.69 Rs. 96,582.82

11% Rs. 91,033.38 Rs. 78,076.27

12% Rs. 77,951.92 Rs. 60,345.67

13% Rs. 65,415.24 Rs. 43,349.08

14% Rs. 53,393.42 Rs. 27,047.32

15% Rs. 41,858.53 Rs. 11,403.68

16% Rs. 30,784.42 -Rs. 3,616.2017% Rs. 20,146.68 -Rs. 18,044.54

18% Rs. 9,922.43 -Rs. 31,911.54

19% Rs. 90.24 -Rs. 45,245.56

20% -Rs. 9,369.96 -Rs. 58,073.24

1st point attack to IRR

The crossover point

-Rs. 100,000.00

-Rs. 50,000.00

Rs. 0.00

Rs. 50,000.00

Rs. 100,000.00

Rs. 150,000.00

Rs. 200,000.00

Rs. 250,000.00

4% 5% 6


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c is < cross over rate there will be conflict

ach other

% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%

Chart Title

NPV A NPVB


26/41

A B

1 Rs. 1,000,000.00 Rs. 225,000.00

2 Rs. 225,000.00

3 Rs. 225,000.00

4 Rs. 225,000.00

5 Rs. 225,000.00

6 Rs. 225,000.007 Rs. 225,000.00

Rs. 1,132,414.39

Rs. 198,690.52 indifferent instalment


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IRR NO IRR as there is no reciept


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Project K Project L

-1500000 -150000

1 450000 45000

2 450000 45000

3 450000 45000 2nd point of attack to IRR

4 450000 45000 scale difference is not understood5 450000 45000

6 450000 45000

NPV Rs. 459,867.31 Rs. 45,986.73

IRR 19.905% 19.905%


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by IRR


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coc 19% 6%

beginning payment -2000000

installment 450000450000

500000

500000

500000

600000

600000

600000

600000

700000

NPV Rs. 237,832.62 Rs. 1,958,985.70

IRR 22.095% 22.095%

for 19% for 6 %


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-100000

120000

20.00%


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-2000000

1 21010

2 21010

3 21010

4 21010

5 210106 21010

7 21010

8 21010

9 21010

10 21010

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26 2101027 21010

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46 21010

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52 2101053 21010

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90 21010

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93 21010

94 21010

95 21010

96 21010

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98 21010

99 21010100 21010

101 21010

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120 21010121 21010

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140 21010

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145 21010

146 21010147 21010

148 21010

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167 21010168 21010

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187 21010

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193 21010194 21010

195 21010

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234 21010

235 21010

236 21010

237 21010

238 21010

239 21010

240 21010

0.94% 0.94% monthly rate


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1 2 3

-3000 0 0 5600

23.13%


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-2000000 11%

1 200000

2 200000

3 2000004 200000

5 200000

6 200000

7 200000

8 200000

9 200000

10 200000

11 200000

12 200000

13 200000

14 200000

15 200000

16 200000

17 200000

18 200000

19 200000

20 200000 per quarter 7.75% NPV will be 0

1.450384

Rs. -407,334.38


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R S

-1750000 -1345000

766111 330551

471667 551068

311236 659000

478252 365920478252 304074

478252 255113

IRR 19.47% 22.46%

rate NPV R NPV S

2% 1047398.03 969725.14

3% 961207.11 899501.30

4% 879285.12 832515.57

5% 801363.82 768576.85

6% 727194.81 707507.53

7% 656547.83 649142.34

8% 589209.29 593327.42

9% 524980.90 539919.36

10% 463678.40 488784.41

11% 405130.43 439797.75

12% 349177.53 392842.75

13% 295671.17 347810.42

14% 244472.93 304598.75

15% 195453.65 263112.28

16% 148492.82 223261.5617% 103477.82 184962.72

18% 60303.39 148137.08

19% 18871.06 112710.78

20% -20911.33 78614.42

-

1

1


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20000000%

0%

20000000%

40000000%

60000000%

80000000%

00000000%

20000000%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Chart Title

rate NPV R NPV S

cf payback lol

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