B/S

Cash
Inventories
Account receive
able
Furniture
Building
Machinery

250000
500000
300000

A/C payable

500000

6000000
10000000
7000000

Note payable

2000000

Sale is increase by
Furniture , building and machinery are depreciated at straight line method life is
10 year.
OCFO = Revenue - Expense - Depreciation 1-tax + Depreciation
=650000

- 200000 -

230000

NCFO =0

Aqusition of
Assets
Machinery7000000
Building
-10000000
Furiniture600000
Total =2300000
WC
-350000
-2650000
NCFO 0-9
NCFO0-10 Disposition of Asset
Furniture(sale tax)at 40%tax
1500000-600000=900000
Building(3000000-1200000)=1800000

1-tax + 230000

Machinery(2000000-800000=1200000
NCFO 0

ICF

NCFO 0

-2650000+

NCFO0-9

OCF
0 =-2650000

0+362000=362000

NCFO0-10=9000000+362000=1262000

Capital Budgeting Analysis

NPV
=C [1/r-1/r(1+r)] + p v /(1+r)
=362000[1/10-1/10(101)+1262000/(1.1)
=2084767+486555
=2571322
IRR at 100%

out2650000

2571322
At 5%
=362000[1/.05-1/.05(1.05)+1262000/(1.05)
=2573031+774758=3347789
IRR=3347789-2650000/3347789-2571322(0.10-0.05)+0.05
=0.0949 or 9.49%
MIRR
FV=PV(1+r)
1
2
3
4
5
6
7
8
9

362000
362000
362000
362000
362000
362000
362000
362000
362000

362000(1.1)
362000(1.1)
362000(1.1)
362000(1.1)
362000(1.1)
362000(1.1)
362000(1.1)
362000(1.1)
362000(1.1)

=853577
=775979
=
=
=
=530004
=481822
=438020
=

1
0

1262000

1262000

=
= 6669346

MIRR= (FV/PV) -1
=(6669346/2650000)-1
=(6669346/265000) -1
=1.0967-1
=0.0967 or 9.67