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8/4/2019 Cash Flows From Different Perspective
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MAGNUM TECHNOLOGIES LTD.Rs Million
Total Outlay 50 1Application Breakup 2Fixed Assets 30 10 6.67 3
Current Assets 20 50 4Sources Break up 5Equity 15 6Term Loan 20 30Working Capital Finance 10 NWC 7Trade Credit 5 50 5 Margin Money 8
35 Project Cost 9Term Loan is repayable in 5 equal instalments 10of Rs 4 million each due at the end of every year. 11
12
Retirement of working capital and trade credit 13at the end of project - fifth year end. 1415
Interest rates : % age 16Working Capital 12Term Loan 10 17
18 Annual Revenues 60Operating Costs (Ex Depr.) 42 19Depreciation rate 15% WDV MethodNet Salvage Value 20Fixed Assets 5Current Assets 20
Tax Rate 30
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EQUITY METHOD0 1 2 3 4 5
Equity Funds -15Revenues 60.00 60.00 60.00 60.00 60.00Operating Costs 42.00 42.00 42.00 42.00 42.00 Book Va
Depreciation 4.50 3.83 3.25 2.76 2.35Interest on WCF 1.20 1.20 1.20 1.20 1.20Interest on TL 2.00 1.60 1.20 0.80 0.40
Profit before Tax 10.30 11.38 12.35 13.24 14.05Tax 3.09 3.41 3.70 3.97 4.22Profit after Tax 7.21 7.96 8.64 9.27 9.84Preference Dividend 0.00 0.00 0.00 0.00 0.00Net Salvage Value of Fixed Assets 5.00Net Salvage Value of Current Assets 20.00
Repayment of Term Loan 4.00 4.00 4.00 4.00 4.00Redemption of Preference Capital 0.00 0.00 0.00 0.00 0.00Repayment of WCF 10.00Retirement of Trade Creditors 5.00
Initial Investment -15Operating Cash Inflows( 9 + 4 - 10 ) 11.71 11.79 11.90 12.03 12.18Liquidation and Retirement CashFlows ( 11+12-13-14-15-16) -4.00 -4.00 -4.00 -4.00 6.00 -4Net Cash Flow -15.00 7.71 7.79 7.90 8.03 18.18
LONG TERM FUNDS METHOD
Initial Investment -35
Profit after Tax 7.21 7.96 8.64 9.27 9.84Preference Dividend 0.00 0.00 0.00 0.00 0.00Net Salvage Value of Fixed Assets 5.00Net Salvage Value of Current Assets 20.00Repayment of Term Loan 4.00 4.00 4.00 4.00 4.00
Redemption of Preference Capital 0.00 0.00 0.00 0.00 0.00Repayment of WCF 10.00Retirement of Trade Creditors 5.00
Initial Investment -35Operating Cash Inflows ( PAT +Depr. + Int. on TL (1-t)) 13.11 12.91 12.74 12.59 12.46
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Terminal Cash Flow( 11+12 ) 10.00
Net Cash Flow -35.00 13.11 12.91 12.74 12.59 22.46
TOTAL FUNDS METHOD
Initial Investment -50
Profit after Tax 7.21 7.96 8.64 9.27 9.84Preference Dividend 0.00 0.00 0.00 0.00 0.00Net Salvage Value of Fixed Assets 5.00Net Salvage Value of Current Assets 20.00Repayment of Term Loan 4.00 4.00 4.00 4.00 4.00Redemption of Preference Capital 0.00 0.00 0.00 0.00 0.00Repayment of WCF
Retirement of Trade Creditors
Initial Investment -50Operating Cash Inflows ( PAT + Depr.+Int. on TL (1-t) +Int. on WCF (1-t)) 13.95 13.75 13.58 13.43 13.30Terminal Cash Flow( 11+12 ) 25.00
Net Cash Flow -50.00 13.95 13.75 13.58 13.43 38.30
IRR Cost of CapitalEquity Method Err:523 0.18 15 0.08Long Term Funds Err:523 0.12 20 0.04Total Funds Err:523 0.1 35 0.12
Total Funds15 0.0520 0.03 0.0310 0.02
5 050 0.1
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COMPUTATION OF INTEREST
lue of FA Interest on Term Loan
13.31Year Opening Repayment during Closing Interest
Balance The Year Balance @ 10%
1 20 4 16 2.002 16 4 12 1.603 12 4 8 1.204 8 4 4 0.805 4 4 0 0.40
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MAGNUM TECHNOLOGIES LTD.Rs Million
Total Outlay 640Application BreakupFixed Assets 400
Current Assets 240 640Sources Break upEquity 240Term Loan 200 240Working Capital Finance 120 NWCTrade Credit 80 640 40
400Term Loan is repayable in 5 equal instalmentsof Rs 4 million each due at the end of every year.
Retirement of working capital and trade creditat the end of project - fifth year end.
Interest r % ageWorking C 12Term Loan25*8 starting at 1.5 yrs & int @14%
Annual RevenuesOperating Costs (Ex Depr.)Depreciation rate 15% WDV MethodNet Salvage ValueFixed AssetsCurrent Assets
Tax Rate 30
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EQUITY METHOD0
1 Equity Funds -2002 Revenues3 Operating Costs
4 Depreciation5 Interest on WCF6 Interest on TL
7 Profit before TaxMargin Money for W 8 TaxProject Cost 9 Profit after Tax
10 Preference Dividend11 Net Salvage Value of Fixed Assets12 Net Salvage Value of Current Assets
13 Repayment of Term Loan14 Redemption of Preference Capital15 Repayment of WCF16 Retirement of Trade Creditors
17 Initial Investment -20018 Operating Cash Inflows
( 9 + 4 - 10 )19 Liquidation and Retirement Cash
Flows ( 11+12-13-14-15-16)20 Net Cash Flow -200.00
Err:523LONG TERM FUNDS METHOD
Initial Investment -200
Profit after TaxPreference DividendNet Salvage Value of Fixed AssetsNet Salvage Value of Current AssetsRepayment of Term Loan
Redemption of Preference CapitalRepayment of WCFRetirement of Trade Creditors
Initial InvestmentOperating Cash Inflows ( PAT +Depr. + Int. on TL (1-t))
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Terminal Cash Flow( 11+12 )
Net Cash Flow
TOTAL FUNDS METHOD
Initial Investment
Profit after TaxPreference DividendNet Salvage Value of Fixed AssetsNet Salvage Value of Current AssetsRepayment of Term LoanRedemption of Preference CapitalRepayment of WCF
Retirement of Trade Creditors
Initial InvestmentOperating Cash Inflows ( PAT + Depr.+Int. on TL (1-t) +Int. on WCF (1-t))Terminal Cash Flow( 11+12 )
Net Cash Flow
IRREquity MethodLong Term FundsTotal Funds
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1 2 3 4 5 6-40
750.00 750.00 750.00 750.00 750.00525.00 525.00 525.00 525.00 525.00
60.00 51.00 43.35 36.85 31.3214.40 14.40 14.40 14.40 14.4028.00 26.25 19.25 12.25 5.25 DEPREC
TIME122.60 133.35 148.00 161.50 174.03 0
36.78 40.01 44.40 48.45 52.21 185.82 93.35 103.60 113.05 121.82 2
3100.00 4240.00 5
0.00 0.00 50.00 50.00 50.00 50.00
120.0080.00
Year -40.00
145.82 144.35 146.95 149.90 153.14 0.000.50
0.00 0.00 -50.00 -50.00 -50.00 90.00 1.00-40.00 145.82 144.35 146.95 149.90 153.14 1.50
2.002.503.00
-240 3.504.00
85.82 93.35 103.60 113.05 121.82 4.505.00
100.00 5.500.00 6.00
0.00 -2.18 16.10 41.00 63.95 85.25
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COMPUTATION OF INTEREST
IATIONPRESENT COST DEPRECIAT DEPRECIATION VALUE
400 400 0400 340 60340 289 51289 245.65 43.35
245.65 208.8 36.85208.8 177.48 31.32
Interest on Term Loan
Opening payment duri Closing InterestBalance The Year Balance @ 14%
0 0 00 0 0 0.00
200 0 200 0.00200 0 200 14.00200 0 200 14.00 28.00200 25 175 14.00175 25 150 12.25 26.25150 25 125 10.50125 25 100 8.75 19.25100 25 75 7.0075 25 50 5.25 12.2550 25 25 3.5025 25 0 1.75 5.25
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