Problem 1

cr
Loan
Interest

300
Base rate
Spread
Total Int

9.25%
3.25%
12.50%

1
100

2
105

3
107

4
107

5
105

6
105

7
105

1
300
42.86
37.5
257.14

2
257.14
42.86
32.14
214.29

3
214.29
42.86
26.79
171.43

4
171.43
42.86
21.43
128.57

5
128.57
42.86
16.07
85.71

6
85.71
42.86
10.71
42.86

7
42.86
42.86
5.36
0.00

100
37.50
42.86
19.64

105
32.14
42.86
30.00

107
26.79
42.86
37.36

107
21.43
42.86
42.71

105
16.07
42.86
46.07

105
10.71
42.86
51.43

105
5.36
42.86
56.79

1
15%
300
45
37.50
300

2
20%
240
60
30.00
240

3
10%
210
30
26.25
210

4
10%
180
30
22.50
180

5
20%
120
60
15.00
120

6
15%
75
45
9.38
75

7
10%
45
30
5.63
45

100
37.50
45
17.50

105
30.00
60
15.00

107
26.25
30
50.75

107
22.50
30
54.50

105
15.00
60
30.00

105
9.38
45
50.63

105
5.63
30
69.38

Year
FCFF

Opening
Principal
Interest
Closing

Debt Schedule
Equated
0
300

300

FCFF
Less Int
Less Debt
FCFE
Structured
0
Repayment
Opening
Principal
Interest
Closing
FCFF
Less Int
Less Debt
FCFE

300

300

100%

Problem 2cr
Project Cost
Debt
Equity

100
85%
15%

85
15

Capex 4 installment in periods 1-4

25 cr
Debt Struc ture
Senior Debt
100% Repayment
Interest
Senior Debt
85
Sub Debt
0

10 Sub Debt
7%

0% Repayment
Interest

FCFF
14 for the project life
*Since here the senior debt period is 10 years the project life can be assumed to be 10 years
In case nothing is mentioned then safely take equated principal repayment

Years
FCFF
Opening
Principal
Interest
Cl Debt

1
14
85
8.5
5.95
76.5

FCFE Calculation
FCFF
14
Interest
5.95
Debt Rep
8.5
FCFE
-0.45
Equity IRR
-15
-0.45
5.33%

2
14
76.5
8.5
5.36
68

3
14
68
8.5
4.76
59.5

4
14
59.5
8.5
4.17
51

5
14
51
8.5
3.57
42.5

6
14
42.5
8.5
2.98
34

7
14
34
8.5
2.38
25.5

14
5.36
8.5
0.15

14
4.76
8.5
0.74

14
4.17
8.5
1.34

14
3.57
8.5
1.93

14
2.98
8.5
2.53

14
2.38
8.5
3.12

0.15

0.74

1.34

1.93

2.53

3.12

5
12%

be assumed to be 10 years

8
14
25.5
8.5
1.79
17

9
14
17
8.5
1.19
8.5

10
14
8.5
8.5
0.60
0

14
1.79
8.5
3.72

14
1.19
8.5
4.31

14
0.60
8.5
4.91

3.72

4.31

4.91

Problem3
Project Cost
Debt
Equity

100
85%
15%

85
15

Capex 4 installment in periods 1-4

25 cr
Debt Struc ture
Senior Debt
75% Repayment
Interest
Senior Debt
63.75
Sub Debt
21.25

10 Sub Debt
7%

25% Repayment
Interest

FCFF
14 for the project life
*Since here the senior debt period is 10 years the project life can be assumed to be 10 years
In case nothing is mentioned then safely take equated principal repayment

Years
1
FCFF
14
Senior Debt Schedule
Opening
63.75
Principal
6.38
Interest
4.46
Cl Debt
57.375

2
14

3
14

4
14

5
14

6
14

7
14

57.375
6.38
4.02
51

51
6.38
3.57
44.625

44.625
6.38
3.12
38.25

38.25
6.38
2.68
31.875

31.875
6.38
2.23
25.5

25.5
6.38
1.79
19.125

Sub Debt Schedule

Opening
21.25
Principal
4.25
Interest
2.55
Cl Debt
17

17
4.25
2.04
12.75

12.75
4.25
1.53
8.5

8.5
4.25
1.02
4.25

4.25
4.25
0.51
0

7.01

6.06

5.10

4.14

3.19

2.23

1.79

10.63

10.63

10.63

10.63

10.63

6.38

6.38

14
6.06
10.63
-2.68

14
5.10
10.63
-1.73

14
4.14
10.63
-0.77

14
3.19
10.63
0.19

14
2.23
6.38
5.39

14
1.79
6.38
5.84

-2.68

-1.73

-0.77

0.19

5.39

5.84

Total Interest
Senior + Sub
Total Debt
Senior + Sub

FCFE Calculation
FCFF
14
Interest
7.01
Debt Rep
10.63
FCFE
-3.64
Equity IRR
-15
-3.64
3.91%

5
12%

be assumed to be 10 years

8
14

9
14

10
14

19.125
6.38
1.34
12.75

12.75
6.38
0.89
6.375

6.375
6.38
0.45
0

1.34

0.89

0.45

6.38

6.38

6.38

14
1.34
6.38
6.29

14
0.89
6.38
6.73

14
0.45
6.38
7.18

6.29

6.73

7.18

Problem 4
Project Cost
Debt
Equity

100
85%
15%

85
15

Capex 4 installment in periods 1-4

25 cr
Working Capital requirement
3% of project cost
Debt Struc ture
Senior Debt
75% Repayment
10 Sub Debt
Interest
7%
Senior Debt
63.75
Sub Debt
21.25

Int on WC
25% Repayment
Interest

FCFF
14 for the project life
*Since here the senior debt period is 10 years the project life can be assumed to be 10 years
In case nothing is mentioned then safely take equated principal repayment

Years
FCFF

1
14

2
14

3
14

4
14

5
14

6
14

7
14

Working Capital Schedule

WC requirement
3
1
2
Op Balance
3
3
Payment
3
3
Interest
0.21
0.21
Cl Balance
0
0

3
3
3
0.21
0

4
3
3
0.21
0

5
3
3
0.21
0

6
3
3
0.21
0

7
3
3
0.21
0

31.875
6.38
2.23
25.5

25.5
6.38
1.79
19.125

2.23
0.21
2.44

1.79
0.21
2.00

Senior Debt Schedule

Opening
63.75
Principal
6.38
Interest
4.46
Cl Debt
57.375

57.375
6.38
4.02
51

51
6.38
3.57
44.625

44.625
6.38
3.12
38.25

38.25
6.38
2.68
31.875

Sub Debt Schedule

Opening
21.25
Principal
4.25
Interest
2.55
Cl Debt
17

17
4.25
2.04
12.75

12.75
4.25
1.53
8.5

8.5
4.25
1.02
4.25

4.25
4.25
0.51
0

6.06
0.21
6.27

5.10
0.21
5.31

4.14
0.21
4.35

3.19
0.21
3.40

Total Interest
Senior + Sub
WC

7.01
0.21
7.22

Total Debt
Senior + Sub

10.63

FCFE Calculation
FCFF
14
Interest
7.22
Debt Rep
10.63
FCFE
-3.85
Equity IRR
-15
-3.85
2.87%

10.63

10.63

10.63

10.63

6.38

6.38

14
6.27
10.63
-2.89

14
5.31
10.63
-1.94

14
4.35
10.63
-0.98

14
3.40
10.63
-0.02

14
2.44
6.38
5.18

14
2.00
6.38
5.63

-2.89

-1.94

-0.98

-0.02

5.18

5.63

7%
5
12%

be assumed to be 10 years

8
14

9
14

10
14

8
3
3
0.21
0

9
3
3
0.21
0

10
3
3
0.21
0

19.125
6.38
1.34
12.75

12.75
6.38
0.89
6.375

6.375
6.38
0.45
0

1.34
0.21
1.55

0.89
0.21
1.10

0.45
0.21
0.66

6.38

6.38

6.38

14
1.55
6.38
6.08

14
1.10
6.38
6.52

14
0.66
6.38
6.97

6.08

6.52

6.97

Problem 5 Cr
Project Cost
200
Operation Start Date T0
Term Loan
100
Interest
5% fixed
Constant repayment in
Tax
30%

5 years

Calculate
Net Income for first 5 years of Project Life
with fixed EBITDA of
75 cr p.a.

EBITDA
Deperciation
EBIT
Interest
PBT
Tax
PAT
Depreciation Schedule
Project Cost
SLM
Opening Block
Depreciation
Closing Block

1
75
40
35
5
30
9
21

1
200
40
160

2
75
40
35
4
31
9.3
21.7

3
75
40
35
3
32
9.6
22.4

200 Project Life

2
3
160
120
40
40
120
80

4
75
40
35
2
33
9.9
23.1

5
75
40
35
1
34
10.2
23.8

5
4
80
40
40

5
40
40
0

4
40
2
20
20

5
20
1
20
0

Debt Repayment Schedule

Op Balance
Interest
Principal
Cl Balance

1
100
5
20
80

2
80
4
20
60

3
60
3
20
40

IRR
*Since debt is 100 and the total project cost is 200, the equity portion is also 100
Cash Flows
PAT
Add Int (1-t)
Add: Dep
NOPAT
Less: WC Movement
Operating CF

21
3.5
40
64.5
0
64.5

21.7
2.8
40
64.5
0
64.5

22.4
2.1
40
64.5
0
64.5

23.1
1.4
40
64.5
0
64.5

23.8
0.7
40
64.5
0
64.5

Less: Capex
FCFF
Project IRR
-200
18%
FCFE Calculation
FCFF
Less Int (1-t)
Less Debt
FCFE
Equity IRR
-100
31%

0
64.5

0
64.5

0
64.5

0
64.5

0
64.5

64.5

64.5

64.5

64.5

64.5

64.5
3.5
20
41

64.5
2.8
20
41.7

64.5
2.1
20
42.4

64.5
1.4
20
43.1

64.5
0.7
20
43.8

41

41.7

42.4

43.1

43.8

Problem 6
The revenue and operating cost of a project of 4000 cr are given below
Project life
10
0
Rev
Op costs
Depreciation Schedule
0

Depreciaiton Calculation
Op Block
Dep
Cl Block

Proj Cost
Debt
Equity
* Debt is equated for the life o
5
6
855
865
175
175

1
1125
175

2
1175
175

3
1225
175

4
840
175

1
20%

2
20%

3
20%

4
10%

5
10%

6
10%

4000
800
3200

3200
800
2400

2400
800
1600

1600
400
1200

1200
400
800

800
400
400

Debt Schedule
Op Bal
3,200.00 2,880.00 2,560.00 2,240.00 1,920.00 1,600.00
Principal
320.00
320.00
320.00
320.00
320.00
320.00
Interest
320.00
288.00
256.00
224.00
192.00
160.00
Cl Balance 2,880.00 2,560.00 2,240.00 1,920.00 1,600.00 1,280.00
Income Statement
Rev
Op costs
EBITDA
Less: Dep
EBIT
Less: Int
PBT
Less: Tax
PAT

1125
175
950
800
150
320
-170
0
-170

1175
175
1000
800
200
288
-88
0
-88

1225
175
1050
800
250
256
-6
0
-6

840
175
665
400
265
224
41
13.53
27.47

855
175
680
400
280
192
88
29.04
58.96

865
175
690
400
290
160
130
42.9
87.1

IRR Calculation
PAT
Add Int (1-t)
Add: Dep
NOPAT
Less: WC Movement
Operating CF
Less: Capex
FCFF
Project IRR
-4000

-170
214.4
800
844.4
0
844.4
0
844.4
844.4

-88
192.96
800
904.96
0
904.96
0
904.96
904.96

-6
171.52
800
965.52
0
965.52
0
965.52
965.52

27.47
150.08
400
577.55
0
577.55
0
577.55
577.55

58.96
128.64
400
587.6
0
587.6
0
587.6
587.6

87.1
107.2
400
594.3
0
594.3
0
594.3
594.3

12%
FCFE Calculation
FCFF
Less Int (1-t)
Less Debt
FCFE
Equity IRR
-800
34%

844.4
214.4
320.00
310.00
310.00

904.96
192.96
320.00
392.00
392.00

965.52
171.52
320.00
474.00
474.00

577.55
150.08
320.00
107.47
107.47

587.6
128.64
320.00
138.96
138.96

594.3
107.2
320.00
167.10
167.10

4000
Interest Base
80%
3200
Spread
20%
800
Interest
* Debt is equated for the life of the project
7
8
9
10
885
895
925
925
175
175
175
175

7
10%

400
400
0

1,280.00
320.00
128.00
960.00

960.00
320.00
96.00
640.00

640.00
320.00
64.00
320.00

320.00
320.00
32.00
0.00

885
175
710
400
310
128
182
60.06
121.94

895
175
720
0
720
96
624
205.92
418.08

925
175
750
0
750
64
686
226.38
459.62

925
175
750
0
750
32
718
236.94
481.06

121.94
85.76
400
607.7
0
607.7
0
607.7
607.7

418.08
64.32
0
482.4
0
482.4
0
482.4
482.4

459.62
42.88
0
502.5
0
502.5
0
502.5
502.5

481.06
21.44
0
502.5
0
502.5
0
502.5
502.5

7% Tax
3%
10%

33%

607.7
85.76
320.00
201.94
201.94

482.4
64.32
320.00
98.08
98.08

502.5
42.88
320.00
139.62
139.62

502.5
21.44
320.00
161.06
161.06

Problem 7
Project Cost
Debt
Equity
Interest Rate
Tax Rate

cr

Schedule of payments during construction per

5000
1
1

2500
2500
10%
30%

Year 0
Year 1
Year 2
Year 3

10%
25%
40%
25%
100%

Every payment during the construction period is financed based on the agreed D/E ratio. The
amortization of the outstanding loan at the end of year 3 starts at the end of year 4 and will be
completed at the end of year 8 according to the following percentages of principal repayment:
Year End
4
5
6
7
8

15%
15%
20%
20%
30%
100%

Calculate:
The outstanding loan amount at the end of yea
The amortixed loan schedule during the loan p
Assuming the company generates a steady ca

Pre operating period-Debt Calculation

Year 0
Year 1
Year 2
100%
10%
25%
40%
Equity

2500 Debt

Year 3
25%

2500
Alternatively

Debt Drawdown
Simple Interest

250
25

25
Interst to be capitalised
Total Debt at the beginning of T4

625
25
62.5

1000
25
62.5
100
187.5

625
25
62.5
100
62.5
250

100
187.5
200
62.5
550

87.5

Year 0
25

550
3050

Debt Schedule
Structured payment
Op Balance
Principal
Interest
Cl Balance

4
15%
3050
457.5
305
2592.5

5
15%
2592.5
457.5
259.25
2135

6
20%
2135
610
213.5
1525

7
20%
1525
610
152.5
915

8
30%
915
915
91.5
0

Project Cash Flows

100%
3050

FCFF
Less: Int (1-t)
Less: Debt
FCFE
Equity IRR
-2500

1000
213.5
457.5
329

1000
181.475
457.5
361.025

1000
149.45
610
240.55

1000
106.75
610
283.25

1000
64.05
915
20.95

329
-24%

361.025

240.55

283.25

20.95

s during construction period

reed D/E ratio. The

of year 4 and will be
principal repayment:

amount at the end of year T3

chedule during the loan period of T4-T8
ny generates a steady cash flow of 1000 cr for next 5 years

Alternatively
Year 1
Year 2
Year 3
87.5
187.5
250

550

Project Life

Working Capital requirement

1
2
3
17
20
25
WC Interest
15%
Term Loan
28
Int on TL
15%
TL repayment equated
Sales
80 per year
Operating cost incl depreciation
Rate of depreciation

Cost of Project
Particular
Rs Lacs
Land
5
Civil Works
10
Machinery
15
Mis FA
5
Contingency
3
Total
38
Project Cost
Debt
Equity

38
28
10

74%
26%

Depreciation Schedule
Asset Block
Less Dep
Net Blcok

1
38.00
7.60
30.40

2
30.40
6.08
24.32

3
24.32
4.86
19.46

4
19.46
3.89
15.56

5
15.56
3.11
12.45

Operating cost incl dep

Less Dep
Op cost

40
7.60
32.40

40
6.08
33.92

40
4.86
35.14

40
3.89
36.11

40
3.11
36.89

Sales
Less: Op cost
EBITDA
Less: Dep
EBIT
Less: Int
PBT
Less: Tax
PAT

1
80
32.40
47.60
7.60
40.00
6.75
33.25
10.79
22.46

2
80
33.92
46.08
6.08
40.00
6.36
33.64
10.92
22.72

3
80
35.14
44.86
4.86
40.00
6.27
33.73
10.95
22.78

4
80
36.11
43.89
3.89
40.00
5.43
34.57
11.22
23.35

5
80
36.89
43.11
3.11
40.00
4.59
35.41
11.49
23.92

Cash Flow Statement

PAT
Add Int (1-t)
Add: Dep
NOPAT
Less: WC Movement
Operating CF
Less: Capex

22.46
4.56
7.60
34.62
17
17.62
0

22.72
4.30
6.08
33.10
3
30.10
0

22.78
4.24
4.86
31.88
5
26.88
0

23.35
3.67
3.89
30.91
0
30.91
0

23.92
3.10
3.11
30.13
0
30.13
0

Income Statement

4
25

5
40
20% WDV

5
25

FCFF
Project IRR

FCFE Calculation
FCFF
Less Int (1-t)
Less Debt
FCFE
Equity IRR

-38
58%

-10
48%

17.62
17.62

30.10
30.10

26.88
26.88

30.91
30.91

30.13
30.13

17.62
4.56
5.6
7.46
5.6

30.10
4.30
5.6
20.20
5.6

26.88
4.24
5.6
17.05
5.6

30.91
3.67
5.6
21.64
5.6

30.13
3.10
5.6
21.43
5.6

Div pay-out
1
2
10%
15%
Tax rate
32.45%

3
20%

4
20%

5
20%

Prepare the cash flow statement and calculate

Project IRR
Equity IRR
Minimum return the equity Investors expect from the Project is 20%
Debt Schedule
Op Debt
Principal
Interest
Cl Debt

1
28
5.6
4.2
22.4

2
22.4
5.6
3.36
16.8

3
16.8
5.6
2.52
11.2

4
11.2
5.6
1.68
5.6

5
5.6
5.6
0.84
0

WC Schedule
WC requirement
WC movement
WC Interest

17
17
2.55

20
3
3

25
5
3.75

25
0
3.75

25
0
3.75

Total Interest

6.75

6.36

6.27

5.43

4.59