Clg Road Street A
Site Study ₹ 200,000.00 -
Intitial refurb' ₹ 1,000,000.00 -
opportunity (lease_p.a) ₹ 120,000.00 ₹ 250,000.00
Bank loan @12% ₹ 1,000,000.00 -
25% of the customers at 'Street A' are retained.
Sales_p.a ₹ 2,100,000.00 ₹ 1,500,000.00
V.Cost _p.a ₹ 1,000,000.00 ₹ 1,100,000.00
Fixed Cost_p.a ₹ 150,000.00 ₹ 240,000.00
Tax rate 35%
Depreciation 20%
WACC 10%
Interest 12%
p&l incremental_1 incremental_2 incremental_3
Sales ₹ 2,100,000.00 ₹ 1,500,000.00 ₹ 600,000.00 ₹ 600,000.00 ₹ 600,000.00
V.Cost ₹ 1,000,000.00 ₹ 1,100,000.00 ₹ -100,000.00 ₹ -100,000.00 ₹ -100,000.00
Contribution ₹ 1,100,000.00 ₹ 400,000.00 ₹ 700,000.00 ₹ 700,000.00 ₹ 700,000.00
Fixed Cost ₹ 150,000.00 ₹ 240,000.00 ₹ -90,000.00 ₹ -90,000.00 ₹ -90,000.00
Interest ₹ 120,000.00 ₹ - ₹ 120,000.00 ₹ 96,000.00 ₹ 72,000.00
Depreciation @20% ₹ 200,000.00 ₹ - ₹ 200,000.00 ₹ 200,000.00 ₹ 200,000.00
Operating Profit before T ₹ 630,000.00 ₹ 160,000.00 ₹ 470,000.00 ₹ 494,000.00 ₹ 518,000.00
Lease rent rcvd' ₹ 250,000.00 ₹ 120,000.00 ₹ 130,000.00 ₹ 130,000.00 ₹ 130,000.00
Net Profit before Tax ₹ 880,000.00 ₹ 280,000.00 ₹ 600,000.00 ₹ 624,000.00 ₹ 648,000.00
Tax@35% ₹ 308,000.00 ₹ 98,000.00 ₹ 210,000.00 ₹ 218,400.00 ₹ 226,800.00
Net Profit after Tax ₹ 572,000.00 ₹ 182,000.00 ₹ 390,000.00 ₹ 405,600.00 ₹ 421,200.00
Cash flow after Tax ₹ 772,000.00 ₹ 182,000.00 ₹ 590,000.00 ₹ 605,600.00 ₹ 621,200.00
Present Value CASH FLOW 5 yrs
initial refurb' ₹ -1,000,000.00
Bank loan ₹ 1,000,000.00
After Tax Cash Inflows ₹ 2,343,608.30
Loan repayment ₹ -758,157.35
NPV ₹ 1,585,450.94
Based on NPV method it is advised to relocate the eatery to college road.
ASSUMPTIONS
1. There is no depreciation if the eatery continued its operations in Street A.
2. Even thought the site study costs and the fact that 25% of customers are from old store are important for o
decisions, they are not relavent for the matter under consideration
3. Loan is repaid in 5 years ( life of project)
4. WACC of 10% given in the question is used for calculations instead of the interest rate of 12% we are payin
decision is not affected even we use 12% in our calculations)
5. Opportunity costs ( lease rentals) are not subtracted from the cash flows as there are two assets and the im
is given in the incemental income statement.
incremental_4 incremental_5
₹ 600,000.00 ₹ 600,000.00
₹ -100,000.00 ₹ -100,000.00
₹ 700,000.00 ₹ 700,000.00
₹ -90,000.00 ₹ -90,000.00
₹ 48,000.00 ₹ 24,000.00
₹ 200,000.00 ₹ 200,000.00
₹ 542,000.00 ₹ 566,000.00
₹ 130,000.00 ₹ 130,000.00
₹ 672,000.00 ₹ 696,000.00
₹ 235,200.00 ₹ 243,600.00
₹ 436,800.00 ₹ 452,400.00
₹ 636,800.00 ₹ 652,400.00 working note for LOAN
PV factors @ 10% Principal repayment Interest
0 1 200000 ₹ 120,000.00
1 0.90909 200000 ₹ 96,000.00
2 0.82645 200000 ₹ 72,000.00
3 0.75131 200000 ₹ 48,000.00
4 0.68301 200000 ₹ 24,000.00
5 0.62092 758157.35388169
cummulative3.79079
A.
re from old store are important for other internal
he interest rate of 12% we are paying on capital. ( the
ws as there are two assets and the impact of the same
note for LOAN
Annual Pmts
₹ 320,000.00
₹ 296,000.00
₹ 272,000.00
₹ 248,000.00
₹ 224,000.00
