UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

___________________________________________________________________________________________________

PROJECT
FUNDAMENTAL CORPORATE FINANCIAL
______________________________________________________
Submitted to:

Sir. Sadir Ali Zaidi

Submitted by:
Faiza Ghulam Rasool
Komal Shahid
Usman Mubeen
Mavra Maqbool

Course Title:

(2011-MBA-005)
(2011-MBA-009)
(2011-MBA-017)
(2011-MBA-010)

Fundamental of Corporate Finance

FUNDAMENTAL OF CORPORATE FINANCE

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

TABLE OF CONTENTS
ACKNOWLEDGEMENT ........................................................................................................................... 3
EXECUTIVE SUMMARY .......................................................................................................................... 4
Vision Statement: .......................................................................................................................5
Mission Statement: ....................................................................................................................5
PROJECT PROFILE .................................................................................................................................. 6
HUMAN RESOURCE REQUIREMENT: .................................................................................................... 8
Office Equipment & Other Equipment Requirement:......................................................................... 9
FURNITURE & FIXTURE REQUIREMENT: ............................................................................................. 10
LAND & BUILDING REQUIREMENT:..................................................................................................... 10
REVENUE: ................................................................................................................................. 11
FIXED COST CALCULATION: ....................................................................................................... 11
Performa Income Statements ................................................................................................... 12
6th Tools .................................................................................................................................. 13
SENERIO ANALYSIS .............................................................................................................................. 16
Income Statements for Worst case by 10% decrease ........................................................................ 18
Income Statement for Best Case by Increasing 10% .......................................................................... 19
Sensitivity Analysis ................................................................................................................... 20
Break Even Analysis............................................................................................................................ 22

FUNDAMENTAL OF CORPORATE FINANCE

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

ACKNOWLEDGEMENT
To commence with things we would like to take this opportunity to gratefully thank the
Almighty ALLAH for keeping us in good health all through our project work. We take this
opportunity to dedicate this project to our Parents whom love and prayers are always with
us and to our teacher Mr. Sadir Zaidi. The word thank you is not enough for his
tremendous support and help. We feel motivated and encouraged every time we went to
him. Without his encouragement and guidance, this project would not have materialized.
Finally we thank each and every one who helped us to complete this project.

FUNDAMENTAL OF CORPORATE FINANCE

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

EXECUTIVE SUMMARY
This project involves establishing a School in Lahore Punjab, starting classes from Play-group to
Class II. The target market of this school is children, 3 7 years of age, belonging to the middle
income group. The school will provide quality education starting at the Elementary level
charging an affordable fee. The school will practice advanced educational procedures
teaching an extensive curriculum and using modern teaching methodology in sync with
international standards. Qualified and experienced faculty will be hired. The school will have
sophisticated infrastructural facilities, spacious classrooms, and wide-ranging learning material
from books to toys for a good educational experience.
Schools with high reputation have a stringent admission selection process, for which Schools
provide the necessary training. This has given rise to high demand for School systems that can
prepare children for admission to reputable Primary schools. With the growing population and
a limited number of schools, establishment of elementary schools has become a requirement
for necessary educational training starting at an early age.
The total project cost for setting up this school is estimated at Rs. 4300,000. The project NPV is
around Rs. 2491933, with an IRR of 35.96% and payback period of 3.50 years. The legal business
status of this project is proposed as Partnership

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UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

Vision Statement:

Inspiring our children to create a better world

With their own hands

Mission Statement:
Our mission at this school is

to nurture, inspire and support each child's individual development within a

safe, enriched and welcoming learning community that embodies the
Montessori principles of respect for others and respect for environment;
to faster the growth of self-confidence, independence, self-discipline and
personal and social responsibility; and
To foster children's innate love of learning and to make their introduction to
education a joyful and purposeful start to a journey of lifelong learning.

FUNDAMENTAL OF CORPORATE FINANCE

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

PROJECT PROFILE
The project is about starting a School (Elementary level education) for children. The proposed plan
is to start classes from Playgroup to Class II.

Project Brief

The study provides information regarding setting up a School in Lahore Pakistan. Our School will be
located in an easily approachable location in line with the selected target market.

Opportunity Rational

School education is the first formal learning stage for a child. A child learns to recognize different
alphabets, words, sounds and characteristics. It teaches children to behave in groups, helping them
learn socialization at an early stage.
The fast paced life of the Lahore city is significantly influencing the life style of its inhabitants. Economic
pressures are compelling both parents to work towards achieving and sustaining quality life standards.
This has further added to complexity and competition of a Lahore city. As a result of these social
changes, the trend of sending children to Daycare Centers or to Schools at a much earlier age is gaining
rapid grounds.
The growing population has exhausted the limited capacity of the existing private as well as public
primary school systems. The growing population has put tremendous pressure on the existing public
sector education infrastructure in the country. Private sector with its investment capacity to provide
well equipped and well staffed school system is therefore, well positioned to exploit this opportunity for
establishing viable school systems in the country.
Partnership Contribution
Every individual contribution equally:
4.3million/4= 1.75million (each person)
Project Cost
Total project cost for setting up a School is estimated at Rs. 43, 00000. The financial structure for
the project is 100% equity financed by 4 persons.
Viable size
The minimum viable size for this particular school is around 350 students.

FUNDAMENTAL OF CORPORATE FINANCE

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

Brief Description of Proposed Project

In this project we are introducing Pakistan first anti-bacterial dish
wash bar.
Project

Open a new School

Name

School of Excellence

Project Site

Total Area

2.5 Canals

Operating Time

08:00AM 01:00PM

27-B M.M Alam Gulberg III Lahore

25 days a month,
12 months a year
Project Capacity

FUNDAMENTAL OF CORPORATE FINANCE

26 People at a time

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

Proposed Capacity
It is proposed that students be admitted for Playgroup to Class II. There are 15 proposed
classrooms for the school having a total capacity of 350 students. However, this capacity may not be
achieved in the initial years of operations.
The year wise capacity utilization details are mentioned in the table below:
CLASS

Year I

Year II

Year III

Year IV

Year V

Playgroup

50

55

60

65

70

KG-I

50

55

60

65

70

KG-II

50

55

60

65

70

Class I

50

55

60

65

70

Class II

50

55

60

65

70

Total

250

275

300

325

350

Regulation:

Formal registration is required for the setup of new Montessori and elementary schools with the
Executive District Officer (EDO) education. The application is to be submitted on a prescribed form
which can be obtained from the department along with Rs.5000 registration fee and Rs. 500 Annual
Subscriptions. Domestic rates apply on the utility bills if an institution is registered with the dept.

HUMAN RESOURCE REQUIREMENT:

(Faculty Staff Salary)

POSITION
Principle
Teacher Coordinator
Activity Teacher
Computer Teacher
Teacher for Classes
Games Teacher
Total

No. of Post
1
1
1
1
12
1
-

Salary (per month)

30,000
15,000
10,000
15,000
12,000
10,000
-

FUNDAMENTAL OF CORPORATE FINANCE

Annual Salary
360,000
180,000
120,000
180,000
1,728,000
120,000
5,928,000

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

(Admin Staff Salary)

Position
Accountant
Guard
Peon
Cleaner
Student Attendant
TOTAL

No. of Post
1
2
2
2
2
-

Salary (per month)

15,000
8,000
7,000
7,000
8,000
-

Annual Salary
180,000
192,000
168,000
168,000
192,000
900,000

Office Equipment & Other Equipment Requirement:

Equipments
Computer
Printer
UPS
Air Condition (1.5 tons)
Telephone Sets
Computer Server
Generator (5KV)
Notice Board
White Board
Refrigerator
Microwave Oven
Water Cooler
Inflatable POOL
Merry Go round
Monkey Bars
Slides
See Saw
Total Office & other Equipments

Units
15
2
10
5
5
1
1
2
15
1
1
3
2
1
1
3
2

Amount
25,000
10,000
7,500
40,000
1,000
50,000
65,000
1,800
2,200
22,000
7,500
15,000
2,000
12,000
10,000
45,000
10,000

FUNDAMENTAL OF CORPORATE FINANCE

Total Cost
375,000
20,000
75,000
200,000
5,000
50,000
65,000
3,600
33,000
22,000
7,500
45,000
4,000
12,000
10,000
135,000
20,000
1,082,100

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

FURNITURE & FIXTURE REQUIREMENT:

Items
Round Table
Chair for student
Table & chair for class I & II
Teacher tables
Teacher Chairs
Book shelves
Children books& toys
Computer chair
Computer Tables
Carpet (Sq. ft)
Principle & admin furniture
Total furniture & fixture

Units
25
205
150
20
5
8
30
15
4020
-

Amount
3000
1000
2000
1500
2500
5000
1500
2500
50
-

Total Cost
75,000
205,000
300,000
30,000
12,500
40,000
150,000
45,000
37,500
201,000
100,000
1,196,000

Total Fixed Asset= 1082100+1196000= 2,278,100

Depreciation:
Depreciation is calculated straight line to zero.
Depreciation = 2278100/5= 455,620 Rs. (per year)

Amortization: Amortization of registration documents.

7500/5= 1500 Rs. (per year)

LAND & BUILDING REQUIREMENT:

Space Requirement
Class rooms
Teacher Staff Room
Library & Entertainment
Room
Admin Room
Computer Class
Washroom & Kitchen
Canteen
Ground
Total Covered Area Required

Required
Area (Sq. ft)
6,000
144
5,000
575
400
270
161
6,800
14,850

The project will establish in a rented building to reduce infrastructure cost. Monthly rent for 2.5
Canal building which rent is estimated at Rs. 200,000.

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UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

REVENUE CALCULATION: (10% increase every year)

Administration fee= 5000 Rs.
Classes
Playgroup
KG- I
KG- II
Class I
Class II

Fee (Rs.)
2500
3000
3000
3500
3500

REVENUE:
Classes
Admission Fee
Play Group
KG- I
KG- II
Class I
Class II
Total Revenue

Year 1
(250*5000)
1,250,000
1,500,000
1,800,000
1,800,000
2,100,000
2,100,000
10,550,000

Year 2
(75*5500)
4,12,500
1,815,000
2,376,000
2,376,000
2,541,000
2,541,000
12,061,500

Year 3
(80*6000)
4,80,000
2,160,000
2,808,000
2,808,000
3,276,000
3,276,000
14,808,000

Year 4
(85*6500)
552,500
2,635,000
3,042,000
3,042,000
3,549,000
3,549,000
16,269,500

Year 5
(90*7,000)
630,000
2,940,000
3,528,000
3,528,000
4,116,000
4,116,000
18,858,000

FIXED COST CALCULATION:

Items
Admin Staff Salary
Building rent
Electricity exp.
Water exp.
Registration fee Amortization
Telephone bill & Interest
Stationery & Entertainment
exp.
Plantation & Decoration
Medical & First Aid
Promotional (Marketing) exp.
Repair & Maintenance Cost
Miscellaneous exp.
Gas exp
Total Fixed Cost

11

Rs.
900,000
2,400,000
500,000
20,000
1,500
50,000
100,000
12,000
12,000
50,000
20,000
13,000
8,400
4,076,900

FUNDAMENTAL OF CORPORATE FINANCE

After Tax Salvage:

=Salvage Tax rate (Salvage- Book value)
=341715-0.35(341715-0)
ATS = 2, 22,115

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

Performa Income Statements
Base Year Income Statement

Years
Sale
Less: Variable
cost
Gross Profit
Less: Fixed Cost
Less:
Deprecation
EBIT
Less: Tax @34%
Net Income

1st
42200@250=
10,550,000
23712@250=
5,928,000
4,622,000
(4,076,900)
(455,620)

2nd
43860@275
12,061,500
23712@275=
6,520,800
5,540,700
(4,076,900)
(455,620)

3rd
49360@300
14,808,000
23712@300=
7,113,600
7694400
(4,076,900)
(455,620)

4th
50060@325
16,269,500
23712@325=
7,706,400
8563100
(4,076,900)
(455,620)

5th
53880@350
18,858,000
23712@350=
8,299,200
10558800
(4,076,900)
(455,620)

89480
(31,318)
58,162

1,008,180
(352,863)
655,317

3,161,880
(1,106,658)
20,55,222

4,030,580
(1,410,703)
2,619,877

6,026,280
(2,109,198)
3,917,082

Operating Cash Flows:

Years
EBIT
Add: Deprecation
Less: Tax
OCF

1st
89,480
455,620
(31,318)
513,782

2nd
1,008,180
455,620
(352,863)
1,110,937

3rd
3,161,880
455,620
1,106,658
2,510,842

4th
4,030,580
455,620
1,410,703
3,07,5497

5th
6,026,280
455,620
2,109,198
4,372,702

Projected Cash Flow:

Year
Operating cash flow
Change in net working
capital
Net capital spending
Total projected cash
flow

12

0
-2,014,400
-2,285,600
(4,300,000)

1
513,782
-

2
1,110,937
-

3
2,510,842
-

4
3,075,497
-

5
4,372,702
2,014,400

222,115
513,782 1,110,937 2,510,842 3,075,497 6,609,217

FUNDAMENTAL OF CORPORATE FINANCE

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

6th Tools
To analyze the project either it is wok able or not we use six tools which are followings:
Discount Rate 20 %:
NPV: 2,491,933.261
Payback period: 3.05 Years
Discounted payback period: 4.06 Years
Average accounting return: 1,861,132/1,142,800*100= 1.62%
IRR: 35.9655%
Profitability index: 6,791,933.261/2,285,600= 2.971%

1) Net Present Value

The net present value is the difference between an investment market value and its cost.
The net present value of this project is
NPV = 12,491,933.261
The rule of net present value (NPV) is;
If the NPV is positive then the project will be accepted and if the NPV is negative the project will be
rejected
The net present value of this business is positive by Rs.12, 491,933.261 shows that this business is highly
favorable, we can get profit out of it and by applying the rule of NPV, and we will accept that project.

2) Pay Back Period Rule

The payback period is the amount of time required for an investment to generate cash flows sufficient
to recover its initial cost.
Payback period = 3.05 year
The rule of payback period is;
An investment is acceptable if its calculated payback period is less than some pre-specified number of
years which is 5 year.
The total payback time of this investment is 3.05 year and it is acceptable.

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UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

3)

Discounted Pay Back Period Rule

The discounted payback period is the length of time required for an investments discounted cash
flows to equal its initial cost.
The discounted payback period of the business is;
Discounted Payback period = 4.06year
The rule of discounted payback period is;
An investment is acceptable if its calculated discounted payback period is less than some prespecified number of years which is 5 year
The total discounted payback time of this investment is: 4.06 year and it is acceptable.

4) Average Accounting Return

The average accounting return is an investments average net income divided by its average book
value
Average net income:
Average net income= RS.1, 861,132
Average book value:
Average book value =RS. 1,142,800
Average accounting return:
AAR=1861132/1142800
AAR= 1.62%
OR AAR= 0.016
RULE:
Based on the average accounting return rule, a project is acceptable if its average accounting return
(AAR) exceeds a target average accounting return.
We will accept that project, as it is more than the targeted rate of return, which was 35%.

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UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

5) Internal Rate of Return
The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of an
investment zero
IRR = 39.96%
Its mean is we take the rate of return r equals to 39.96%then the net present of that investment
becomes zero.
RULE:
The IRR rule is an investment acceptable if the IRR exceeds the required return. It should be
rejected otherwise.
We will accept this project as the IRR of the project which is 39.96%is higher than the our required
rate of return which was 20%

6) Profitability Index
The profitability index is the present value of an investment, future cash flows divided by its initial
cost. It also known as benefit-cost ratio
PI = present value of future cash flow initial investment
Profitability index = 6, 7919, 933.261 2,285,600
Profitability index = 2.971
RULE:
The project will only accepted if the Profitability index of that very project is greater than one.
DECISION:
We will accept this project as the profitability index of that project is greater than one and it is
strongly recommended in rule of profitability index that the project will accepted if its profitability
index value is greater than one, while our project scoured 2.971

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UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

SENERIO ANALYSIS
Upper & Lower Bound for 1st Year
Selling Units
Price Per Unit Sale
Variable Per Unit Cost
Fixed Cost

Base Case
250
42,200
23,712
4,076,900

Upper Bound
275
46,420
26,083
4,484,590

Lower Bound
225
37,980
21,341
3,669,210

Best & Worst Case for 1st Year

Base Case
250

Best Case
275

Worst Case
225

Price Per Unit Sale

42,200

46,420

37,980

Variable Per Unit Cost

23,712

21,341

26,083

4,076,900

3,669,210

4,484,590

Selling Units

Fixed Cost

Upper & Lower Bound for 2nd Year

Base Case

Upper Bound

Lower Bound

Selling Units

275

303

248

Price Per Unit Sale

43,860

48,246

39,474

Variable Per Unit Cost

23,712

26,083

21,341

Fixed Cost

4,076,900

4,484,590

3,669,210

Base Case

Best Case

Worst Case

Selling Units

275

303

248

Price Per Unit Sale

43,860

48,246

39,474

Variable Per Unit Cost

23,712

21,341

26,083

Fixed Cost

4,076,900

3,669,210

4,484,590

Best & Worst Case for 2nd Year

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UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

Upper & Lower Bound for 3rd Year
Base Case

Upper Bound

Lower Bound

Selling Units

300

330

270

Price Per Unit Sale

49,360

54,296

44,424

Variable Per Unit Cost

23,712

26,083

21,341

Fixed Cost

4,076,900

4,484,590

3,669,210

Base Case

Best Case

Worst Case

Selling Units

300

330

270

Price Per Unit Sale

49,360

54,296

44,424

Variable Per Unit Cost

23,712

21,341

26,083

Fixed Cost

4,076,900

3,669,210

4,484,590

Base Case

Upper Bound

Lower Bound

Selling Units

325

358

293

Price Per Unit Sale

50,060

55,066

45,054

Variable Per Unit Cost

23,712

26,083

21,341

Fixed Cost

4,076,900

4,484,590

3,669,210

Best Case
358
55,066
21,341
3,669,210

Worst Case
293
45,054
26,083
4,484,590

Base Case

Upper Bound

Lower Bound

Selling Units
Price Per Unit Sale

350
53,880

385
59,268

315
48,492

Variable Per Unit Cost

23,712

26,083

21,341

Fixed Cost

4,076,900

4,484,590

3,669,210

Best & Worst Case for 3rd Year

Upper & Lower Bound for 4th Year

Best & Worst Case for 4th Year

Selling Units
Price Per Unit Sale
Variable Per Unit Cost
Fixed Cost

Base Case
325
50,060
23,712
4,076,900

Upper & Lower Bound Case for 5th Year

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FUNDAMENTAL OF CORPORATE FINANCE

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

Best & Worst Case for 5th Year
Base Case

Best Case

Worst Case

Selling Units

350

385

315

Price Per Unit Sale

53,880

59,268

48,492

Variable Per Unit Cost

23,712

21,341

26,083

Fixed Cost

4,076,900

3,669,210

4,484,590

Income Statements for Worst case by 10% decrease

Years

1st

2nd

3rd

4th

5th

Sale
Less: Variable
cost

8,545,500
5,868,675

9,789,552
6,468,584

11,994,480
7,042,410

13,200,822
76,942,319

15,274,980
8,216,145

Gross Profit

2,676,825

3,320,968

4,952,070

5,558,503

7,058,835

Less: Fixed Cost

Less:
Deprecation

4,484,590
-455,620

4,484,590
-455,620

4,484,590
-455,620

4,484,590
-455,620

4,484,590
-455,620

EBIT

-2,263,385

1,619,292

11,806

618,293

2,118,625

Less: Tax@35%
Net Income

-792,185
(3,055,570)

566,735
(1,052,557)

4132
7,674

216,403
401,890

741,519
1,377,106

Operating Cash Flows of Worst Case

Years

1st

2nd

3rd

4th

5th

EBIT

(2,263,385)

1,619,292

11,806

618,293

2,118,625

Add:
Deprecation

455,620

455,620

455,620

455,620

455,620

Less: Tax

792,185

(566,735)

(4132)

(216,403)

(741,519)

OCF

(1,015,580)

1,508,177

463,294

857,510

1,832,726

Net present value of worst case in project

NPV: - 1781988.037
IRR: 7.00%

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UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

Income Statement for Best Case by Increasing 10%

Years
Sale
Less: Variable
cost
Gross Profit
Less: Fixed
Cost
Less:
Deprecation
EBIT
Less: Tax@35%
Net Income

1st
12,765,500
5,868,775

2nd
14,618,538
6,466,323

3rd
17,917,680
7,042,530

4th
10,085,229
7,640,078

5th
22,818,180
8,216,285

6,896,725
3,669,210

8,152,215
3,669,210

10,875,150
3,669,210

12,073,550
3,669,210

14,601,895
3,669,210

455,620

455,620

455,620

455,620

455,620

2,771,895
970,163
1,801,732

4,027,385
1,409,585
2,617,800

6,750,320
2,362,612
4,387,708

7,948,720
2,782,052
5,166,668

10,477,065
3,666,973
6,810,092

Operating Cash Flows of Best Case

Years
EBIT
Add:
Deprecation

1st
2,771,895
455,620

2nd
4,027,385
455,620

3rd
6,750,320
455,620

4th
7,948,720
455,620

5th
10,477,065
455,620

Less: Tax
OCF

970,163
225,732

1,409,585
3,073,420

2,362,612
4,843,328

2,782,052
5,622,288

3,666,973
7,265,712

Net present value of best case in project

NPV: 9,048,396
IRR: 76.18%

19

FUNDAMENTAL OF CORPORATE FINANCE

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

Sensitivity Analysis
By increasing 10% in Fixed cost (Worst Case)

Years
Sale
Less: Variable
cost
Gross Profit
Less: Fixed Cost
Less:
Deprecation
EBIT
Less: Tax@35%
Net Income

1st
42200@250=
10,550,000
23712@250=
5,928,000
4,622,000
4,484,590
455,620

2nd
43860@275
12,061,500
23712@275=
6,520,800
5,540,700
4,484,590
455,620

3rd
49360@300
14,808,000
23712@300=
7,113,600
7,694,400
4,484,590
455,620

4th
50060@325
16,269,500
23712@325=
7,706,400
8,563,100
4,484,590
455,620

5th
53880@350
18,858,000
23712@350=
8,299,200
1,0558,800
4,484,590
455,620

3,18,210
1,11,374
(4,29,583)

6,00,490
21,072
3,90,319

2,754,190
9,63,967
1,790,223

3,622,890
1,268,011
2,354,879

5,618,590
1,966,507
3,652,083

Operating Cash Flow

Years
EBIT
Add:
Deprecation
Less: Tax
OCF

1st
(318,210)
455,620

2nd
6,00,490
455,620

3rd
2,754,190
455,620

4th
3,622,890
455,620

5th
5,618,590
455,620

111,374
2,48,783

21,072
1,035,038

963,967
2,245,843

1,268,011
2,810,499

1,966,507
4,107,703

Net present value of worst case in project

NPV: 1830744
IRR: 31.73%

20

FUNDAMENTAL OF CORPORATE FINANCE

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

By decreasing 10% in Fixed cost (Best Case)

Years
Sale
Less: Variable
cost
Gross Profit
Less: Fixed Cost
Less:
Deprecation
EBIT
Less: Tax@35%
Net Income

1st
42200@250=
10,550,000
23712@250=
5,928,000
4,622,000
3,669,210
455,620

2nd
43860@275
12,061,500
23712@275=
6,520,800
5,540,700
3,669,210
455,620

3rd
49360@300
14,808,000
23712@300=
7,113,600
7,694,400
3,669,210
455,620

4th
50060@325
16,269,500
23712@325=
7,706,400
8,563,100
3,669,210
455,620

5th
53880@350
18,858,000
23712@350=
8,299,200
10,558,800
3,669,210
455,620

497,170
174,010
3,23,160

1,415,870
495,555
920,316

3,569,570
1,249,350
2,320,220

4,438,270
1,553,394
2,884,875

6,433,970
2,251,890
4,182,080

Operating Cash Flow

Years
EBIT
Add:
Deprecation

1st
497,170
455,620

2nd
1,415,870
455,620

3rd
3,569,570
455,620

4th
4,438,270
455,620

5th
6,433,970
455,620

Less: Tax
OCF

174,010
778,780

495,555
1,375,935

1,249,350
2,775,840

1,553,394
3,340,495

2,251,890
4,637,700

Net present value of worst case in project

NPV: 3284439
IRR: 41.12%

21

FUNDAMENTAL OF CORPORATE FINANCE

UNIVERSITY OF VETERINARY AND ANIMAL SCIENCE, LAHORE

Break Even Analysis

Accounting Break Even

Q = FC+D/ (P V.C)
Accounting Break Even
(Units)
245
225
177
172
150

Year
1st
2nd
3rd
4th
5th

Cash Break Even

Q = FC+/ (P V.C)
Where OCF = 0
Year

Cash Break Even

(Units)
220
202
159
155
135

1st
2nd
3rd
4th
5th

Financial Break Even

Year
1st
2nd
3rd
4th
5th

22

Q = FC+OCF/ (P V.C)
Where OCF= 0
Financial Break Even (Units)
369
276
201
188
160

FUNDAMENTAL OF CORPORATE FINANCE