Treco Co.

Nominal Discount Rate 1+N = 1.057 x 1.05= 11%

0' 1 2 3 4 5
Project Cost (250)
Residual Value 5

Sale 433 509 656 338

V.Cost (284) (337) (439) (228)
Fixed Cost (27) (28) (30) (32)
122 144 187 78
Tax @ 30% (37) (43) (56) (23)
Tax Saving @ (C.A) 19 14 11 30

Future Cash Flow (250) 122 126 158 37 7

Discount Factore 11% 1 0.901 0.812 0.731 0.659 0.593
Present Value (250) 110 102 116 25 4

N.P.V 106
(w1) Sale

Demand S.p + inflation Total

1 35 12.36 433
2 40 12.73 509
3 50 13.11 656
4 25 13.51 338

(W2) Variables
Demand V.C + inflation Total
1 35 8.11 284
2 40 8.44 337
3 50 8.77 439
4 25 9.12 228

(W3)
Capital Allowances @ 25% Tax Saving @ 30%
1 62.50
2 46.88 19
3 35.16 14
4 100.47 11
5 30

Project cost 250

Total Capital Allowances (144.53)
105.47
Residual Value (5)
Remaining C.A 100.47