FINANCIAL MANAGEMENT: CALCULATION

1a

　

Year

　

(1)

Cash Flow

(million $)

(2)

Tax

(25%)

(1) – (2) = (3)

After Tax Cash Flow

(million $)

(4)

Discount Factor

@ 7%

(3) x (4)

Present Value

(million $)

0

-12.0

-　

-　

-　

-12.000

1

5.5

1.375

4.125

0.93458

3.855

2

6.5

1.625

4.875

0.87344

4.258

3

7.0

1.750

5.250

0.81630

4.286

Scrap Value

2.0

-　

2.000

0.81630

1.633

　

　

　

　

NPV =

2.032

 

 

 

 

 

 

Discount factor (Real rate)

= [(1 + normal rate) / (1 + inflation rate)] – 1

 

 

 

= [(1 + 12.5%) / (1 + 5.1%)] – 1

 

 

 

 

= (1.125 / 1.051) – 1

 

 

 

 

= 1.07

 

 

 

 

 

= 0.07

 

 

 

 

 

= 7%

 

 

 

NPV of the project is .232 million.

 

 

 

 

 

 

2a

TSR = [Dividend + Capital Gain] / Opening share price, expressed a percentage

 

Capital Gain = (share price at the end of period – share price at the begin of period)

 

TSR

= {[.5 + (.71 - .58)] / 4.58} x 100

 

= {(.5 + .13) / 4.58} x 100

 

 

= {.63 / .58} x 100

 

 

= 0.574 x 100

 

 

 

= 57.4%

 

 

 

Credit:ivythesis.typepad.com