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    Project Apraisal Case: The Findings of The Market Research Are As Follows

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    Wasif Hossain
    Smart Manufacturing Company invested 52 million TK in a new product line and conducted market research costing 8 lac TK. The project is expected to last 5 years with initial sales of 200,000 units growing 6% annually. Cost of goods sold is estimated to be 90% of sales revenue reducing by 3% annually. Operating expenses are expected to be 3 million TK annually increasing 2% with a tax rate of 35%. The NPV of the project is estimated to be 15 million TK with an IRR of 113% and a payback period of 2 years, indicating it is a viable project.

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    Project Apraisal Case: The Findings of The Market Research Are As Follows

    Uploaded by

    Wasif Hossain
    10 views8 pages
    Smart Manufacturing Company invested 52 million TK in a new product line and conducted market research costing 8 lac TK. The project is expected to last 5 years with initial sales of 200,000 units growing 6% annually. Cost of goods sold is estimated to be 90% of sales revenue reducing by 3% annually. Operating expenses are expected to be 3 million TK annually increasing 2% with a tax rate of 35%. The NPV of the project is estimated to be 15 million TK with an IRR of 113% and a payback period of 2 years, indicating it is a viable project.

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    Smart Manufacturing Company invested 52 million TK in a new product line and conducted market research costing 8 lac TK. The project is expected to last 5 years with initial sales of 200,000 units growing 6% annually. Cost of goods sold is estimated to be 90% of sales revenue reducing by 3% annually. Operating expenses are expected to be 3 million TK annually increasing 2% with a tax rate of 35%. The NPV of the project is estimated to be 15 million TK with an IRR of 113% and a payback period of 2 years, indicating it is a viable project.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    10 views8 pages

    Project Apraisal Case: The Findings of The Market Research Are As Follows

    Uploaded by

    Wasif Hossain
    Smart Manufacturing Company invested 52 million TK in a new product line and conducted market research costing 8 lac TK. The project is expected to last 5 years with initial sales of 200,000 units growing 6% annually. Cost of goods sold is estimated to be 90% of sales revenue reducing by 3% annually. Operating expenses are expected to be 3 million TK annually increasing 2% with a tax rate of 35%. The NPV of the project is estimated to be 15 million TK with an IRR of 113% and a payback period of 2 years, indicating it is a viable project.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 8

    Project Apraisal Case

    Smart Manufaturing Company has spent 52 million TK for developing a new product line & further 8 Lac T
    would be worth undertaking.
    The findings of the market research are as follows:
    1) To launch the product on the market, the company will have to spend a futher 2 million TK on delivery v
    salvage value 5 Lac TK after 5 years.
    2) The Project has a life of 5 years where company expects to sell 200000 units of product & it will grow a
    3) Historically Cost of goods sold (COGS) was found 90% of Sales Revenue & expected to be reduced by
    4) Unit Price of Product was set to 120 TK & it will increase by 5% annually.
    5) Operating Expenditure was expcted to be 3 million TK per annum & will increase by 2% annually.
    6) Tax rate is 35% & it will remain stable over the period.
    7) Company needs 1.5 lac Tk annually for meeting day to day expenses over the 1st 3 years & can be rec
    8) Company has financed its investment with a bank loan of 10 Million TK which costs 9% annually.
    9) Cost of capital will be 12% per annum.
    Requirements:
    1) What are the estimated cash flows for this company during the period?
    2) What is the NPV & IRR of this project?
    3) Whether is it a viable project or not?
    4) If this company wants to earn 15 Million TK as NPV how much products does it need to sell?
    raisal Case
    ct line & further 8 Lac TK on market research to find out whether a market launch

    million TK on delivery vehicle that will be depreciated over 5 years & have a

    product & it will grow annually by 6%.


    ected to be reduced by 3% annually.

    e by 2% annually.

    st 3 years & can be recouped after project completion.


    sts 9% annually.

    need to sell?
    Assumptions
    Initial Sales Growth 200000
    Sales Growth 6%
    COGS 90%
    COGS Reduction Rate 3%
    Unit price 120
    Price Growth Rate 5%
    Opex 3000000
    Opex increase Rate 2%
    Tax 35%
    Interest rate 9%
    Cost of Capital 12%

    Smart Manufacturing Company


    Particulars Year 0 Year 1 Year 2 Year 3
    Sales Unit 360,325 426,481 497,240
    Sales Price 120 126 132
    Revenue 43,239,039 53,736,607 65,784,864
    uring Company
    Year 4 Year 5
    572,875 653,672
    139 146
    79,580,887 95,345,114
    Assumptions
    Initial Sales Growth 200000
    Sales Growth 6%
    COGS 90%
    COGS Reduction Rate 3%
    Unit price 120
    Price Growth Rate 5%
    Opex 3000000
    Opex increase Rate 2%
    Tax 35%
    Interest rate 9%
    Cost of Capital 12%

    Smart Manufacturing Company


    Particulars Year 0 Year 1 Year 2
    COGS Rate 90% 87%
    COGS 38,915,135 46,912,058
    Opex 3,000,000 3,060,000
    Depreciation 300,000 300,000
    Interest 900,000 749,617

    Year Beg Bal Installment Interest


    1 10000000 2,570,924.57 900,000.00
    2 8,329,075.43 2,570,924.57 749,616.79
    3 6,507,767.65 2,570,924.57 585,699.09
    4 4,522,542.17 2,570,924.57 407,028.80
    5 2,358,646.39 2,570,924.57 212,278.18
    mart Manufacturing Company
    Year 3 Year 4 Year 5
    85% 82% 80%
    55,707,281 65,368,195 75,967,509
    3,121,200 3,183,624 3,247,296
    300,000 300,000 300,000
    585,699 407,029 212,278

    Prin.pay End.bal
    1,670,924.57 8,329,075.43
    1,821,307.78 6,507,767.65
    1,985,225.48 4,522,542.17
    2,163,895.77 2,358,646.39
    2,358,646.39 0.00
    Assumptions
    Initial Sales Growth 200000
    Sales Growth 6%
    COGS 90%
    COGS Reduction Rate 3%
    Unit price 120
    Price Growth Rate 5%
    Opex 3000000
    Opex increase Rate 2%
    Tax 35%
    Interest rate 9%
    Cost of Capital 12%
    360,325 426,481
    Smart Manufacturing Company
    Year 0 Year 1 Year 2
    Revenue - 43,239,039 53,736,607
    COGS - 38,915,135 46,912,058
    Gross Profit - 4,323,904 6,824,549
    Opex - 3,000,000 3,060,000
    EBITDA - 1,323,904 3,764,549
    Depreciation - 300,000 300,000
    EBIT - 1,023,904 3,464,549
    Interest - 900,000 749,617
    EBT - 123,904 2,714,932
    Tax - 43,366 950,226
    Net Income - 80,538 1,764,706

    EBIT (1-Tax) - 665,538 2,251,957


    Add: Depreciation - 300,000 300,000
    Add/Less: CNWC - (150,000) (150,000)
    Less: Capex (2,000,000) - -
    Add: Salvage Value - - -

    FCF (2,000,000) 815,538 2,401,957


    Cumulative CF (2,000,000) (1,184,462) 1,217,494
    Positive Point - - 1

    PV (2,000,000) 728,159 1,914,825

    NPV 15,000,002

    IRR 113%

    Payback Period 2 Years


    497,240 572,875 653,672
    art Manufacturing Company
    Year 3 Year 4 Year 5
    65,784,864 79,580,887 95,345,114
    55,707,281 65,368,195 75,967,509
    10,077,583 14,212,693 19,377,604
    3,121,200 3,183,624 3,247,296
    6,956,383 11,029,069 16,130,308
    300,000 300,000 300,000
    6,656,383 10,729,069 15,830,308
    585,699 407,029 212,278
    6,070,684 10,322,040 15,618,030
    2,124,739 3,612,714 5,466,310
    3,945,945 6,709,326 10,151,719

    4,326,649 6,973,895 10,289,700


    300,000 300,000 300,000
    (150,000) - 450,000
    - - -
    - - 500,000

    4,476,649 7,273,895 11,539,700


    5,694,144 12,968,038 24,507,739
    - - -

    3,186,390 4,622,692 6,547,936

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