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Forecast Sales 2,000,000

sales commision 15%

Material cost 600,000

Labor Cost 900,000Direct Cost 1,500,000

Annual cash flow 200,000 EBITDA

new equipment 600,000

economic life 10 years

interest rate for loan 8%

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No Tax

Years 0 1 2 3 4 5 6 7

Nett Investment

Equipment Cost

Operating Cash Flow

Sales

Commision

Direct cost (mat)

Direct cost (labor)

Depreciation

EBIT

Tax

Nett Income

Add depreciation

Nett Casho Flow (600,000) 200,000 200,000 200,000 200,000 200,000 200,000 200,000

PV of 1 factor

Present Value

Net Present Value

Internal rate of return 31.11%

Profitability index

Payback Period

Discounted Payback 3.00 (400,000) (200,000) - 200,000 400,000 600,000 800,000

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8 9 10

200,000 200,000 200,000

1,000,000 1,200,000 1,400,000

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Tax 45%

Years 0 1 2 3 4 5 6 7

Nett Investment

Equipment Cost (600,000)

Operating Cash Flow

Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000

Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)

Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)

Direct cost (labor) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000)

Depreciation (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) (60,000)

EBIT 140,000 140,000 140,000 140,000 140,000 140,000 140,000

Tax (63,000) (63,000) (63,000) (63,000) (63,000) (63,000) (63,000)

Nett Income 77,000 77,000 77,000 77,000 77,000 77,000 77,000

Add depreciation 60,000 60,000 60,000 60,000 60,000 60,000 60,000137,000 137,000 137,000 137,000 137,000 137,000 137,000

Nett Casho Flow (600,000) 137,000 137,000 137,000 137,000 137,000 137,000 137,000

PV of 1 factor

Present Value

Net Present Value

Internal rate of return 18.73%

Profitability index

Payback Period

Discounted Payback 4.38 (463,000) (326,000) (189,000) (52,000) 85,000 222,000 359,000

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8 9 10

2,000,000 2,000,000 2,000,000

(300,000) (300,000) (300,000)

(600,000) (600,000) (600,000)

(900,000) (900,000) (900,000)

(60,000) (60,000) (60,000)

140,000 140,000 140,000

(63,000) (63,000) (63,000)

77,000 77,000 77,000

60,000 60,000 60,000

137,000 137,000 137,000

137,000 137,000 137,000

496,000 633,000 770,000

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Tax 45%

WACC 12%

Years 0 1 2 3 4 5 6 7

Nett Investment

Equipment Cost (600,000)

Operating Cash Flow

Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000

Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)

Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)

Direct cost (labor) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000)

Depreciation (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) (60,000)

EBIT 140,000 140,000 140,000 140,000 140,000 140,000 140,000

Tax (63,000) (63,000) (63,000) (63,000) (63,000) (63,000) (63,000)

Nett Income 77,000 77,000 77,000 77,000 77,000 77,000 77,000Add depreciation 60,000 60,000 60,000 60,000 60,000 60,000 60,000

137,000 137,000 137,000 137,000 137,000 137,000 137,000

Nett Casho Flow (600,000) 137,000 137,000 137,000 137,000 137,000 137,000 137,000

PV of 1 factor 1.00 0.89 0.80 0.71 0.64 0.57 0.51 0.45

Present Value (600,000) 122,321 109,216 97,514 87,066 77,737 69,408 61,972

Accumulated Cash Flow (463,000) (326,000) (189,000) (52,000) 85,000 222,000 359,000

Accumulated PV to CF (477,679) (368,463) (270,949) (183,883) (106,146) (36,737) 25,235

Present Value 774,081

Net Present Value 174,081

Internal rate of return 18.73% (Accept because IRR is greater than WACC )

Profitability index 1.290

Payback Period 4.38

Discounted Payback 6.59

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8 9 10

2,000,000 2,000,000 2,000,000

(300,000) (300,000) (300,000)

(600,000) (600,000) (600,000)

(900,000) (900,000) (900,000)

(60,000) (60,000) (60,000)

140,000 140,000 140,000

(63,000) (63,000) (63,000)

77,000 77,000 77,000

60,000 60,000 60,000

137,000 137,000 137,000

137,000 137,000 137,000

0.40 0.36 0.32

55,332 49,404 44,110

496,000 633,000 770,000

80,567 129,970 174,081

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Tax 45%

WACC 12%

Years 0 1 2 3 4 5 6 7 8

Nett Investment

Equipment Cost ###

Operating Cash Flow

Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000

Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)

Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)

Direct cost (labor) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000)

Depreciation (200,000) (80,000) (40,000) (40,000) (40,000) (40,000) (40,000) (40,000)

EBIT - 120,000 160,000 160,000 160,000 160,000 160,000 160,000

Tax - (54,000) (72,000) (72,000) (72,000) (72,000) (72,000) (72,000)

Nett Income - 66,000 88,000 88,000 88,000 88,000 88,000 88,000Add depreciation 200,000 80,000 40,000 40,000 40,000 40,000 40,000 40,000

200,000 146,000 128,000 128,000 128,000 128,000 128,000 128,000

Nett Cash Flow ### 200,000 146,000 128,000 128,000 128,000 128,000 128,000 128,000

PV of 1 factor 1.00 0.89 0.80 0.71 0.64 0.57 0.51 0.45 0.40

Present Value ### 178,571 116,390 91,108 81,346 72,631 64,849 57,901 51,697

Accumulated Cash Flow (400,000) (254,000) (126,000) 2,000 130,000 258,000 386,000 514,000

Accumulated PV to CF (421,429) (305,038) (213,930) (132,584) (59,953) 4,895 62,796 114,493

Present Value 801,864

Net Present Value 201,864

Internal rate of return 20.49%

Profitability index 1.336

Payback Period 3.98

Discounted Payback 5.92

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9 10

2,000,000 2,000,000

(300,000) (300,000)

(600,000) (600,000)

(900,000) (900,000)

(40,000) (40,000)

160,000 160,000

(72,000) (72,000)

88,000 88,000

40,000 40,000

128,000 128,000

128,000 128,000

0.36 0.32

46,158 41,213

642,000 770,000

160,651 201,864

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Tax 45%

WACC 12%

Years 0 1 2 3 4 5 6 7 8

Nett Investment

Equipment Cost ###

Additional Working Capital ###

Operating Cash Flow

Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000

Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)

Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)

Direct cost (labor) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000)

Depreciation (200,000) (80,000) (40,000) (40,000) (40,000) (40,000) (40,000) (40,000)

EBIT - 120,000 160,000 160,000 160,000 160,000 160,000 160,000

Tax - (54,000) (72,000) (72,000) (72,000) (72,000) (72,000) (72,000)Nett Income - 66,000 88,000 88,000 88,000 88,000 88,000 88,000

Add depreciation 200,000 80,000 40,000 40,000 40,000 40,000 40,000 40,000

200,000 146,000 128,000 128,000 128,000 128,000 128,000 128,000

Nett Casho Flow ### 200,000 146,000 128,000 128,000 128,000 128,000 128,000 128,000

PV of 1 factor 1.00 0.89 0.80 0.71 0.64 0.57 0.51 0.45 0.40

Present Value ### 178,571 116,390 91,108 81,346 72,631 64,849 57,901 51,697

Accumulated Cash Flow (700,000) (554,000) (426,000) (298,000) (170,000) (42,000) 86,000 214,000

Accumulated PV to CF (721,429) (605,038) (513,930) (432,584) (359,953) (295,105) (237,204) (185,507)

Present Value 898,456

Net Present Value (1,544)

Internal rate of return 11.96%

Profitability index 0.998

Payback Period 6.33

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Discounted Payback (>10 )

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9 10

300,000

2,000,000 2,300,000

(300,000) (300,000)

(600,000) (600,000)

(900,000) (900,000)

(40,000) (40,000)

160,000 460,000

(72,000) (72,000)88,000 388,000

40,000 40,000

128,000 428,000

128,000 428,000

0.36 0.32

46,158 137,805

342,000 770,000(139,349) (1,544)

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Tax 45%

WACC 12%

NBV 400,000

Sell 200,000

Old Equipment ###

2004 2005 2006 2007 2008 2009 2010 2011

NEW EQUIPMENT

Years 0 1 2 3 4 5 6

Nett Investment

Equipment Cost ###

Additional Working Capital 200,000

Tax reduction sell below NBV 90,000

(710,000)

Operating Cash FlowOriginal EBITDA

Cost Saving 200,000 200,000 200,000 200,000 200,000 200,000

EBITDA 200,000 200,000 200,000 200,000 200,000 200,000

Depreciation Old (200,000) (80,000) (40,000) (40,000) (40,000) (40,000) (40,000)

Depreciation New (333,333) (133,333) (66,667) (66,667) (66,667) (66,667)

ifferenciation of Depreciation (253,333) (93,333) (26,667) (26,667) (26,667) (26,667)

EBIT (53,333) 106,667 173,333 173,333 173,333 173,333

Tax 24,000 (48,000) (78,000) (78,000) (78,000) (78,000)

Nett Income (29,333) 58,667 95,333 95,333 95,333 95,333

Add depreciation 253,333 93,333 26,667 26,667 26,667 26,667224,000 152,000 122,000 122,000 122,000 122,000

Free Cash Flow (710,000) 224,000 152,000 122,000 122,000 122,000 122,000

PV of 1 factor 1.0000 0.8929 0.7972 0.7118 0.6355 0.5674 0.5066

Present Value (710,000) 200,000 121,173 86,837 77,533 69,226 61,809

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Accumulated Cash Flow (486,000) (334,000) (212,000) (90,000) 32,000 154,000

Accumulated PV to CF (510,000) (388,827) (301,989) (224,456) (155,230) (93,421)

Present Value 833,936

Net Present Value 123,936

Internal rate of return 16.32%

Profitability index 1.175

Payback Period 4.74

Discounted Payback 7.78

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2012 2013 2014 2015

7 8 9 10

(300,000) 300,000

(300,000) 300,000

200,000

200,000 200,000 200,000 200,000

200,000 200,000 200,000 400,000

(40,000) (40,000) (40,000)

(66,667) (66,667) (66,667) (66,667)

(26,667) (26,667) (26,667) (66,667)

173,333 173,333 173,333 333,333

(78,000) (78,000) (78,000) (150,000)

95,333 95,333 95,333 183,333

26,667 26,667 26,667 66,667

122,000 122,000 (178,000) 550,000

122,000 122,000 (178,000) 550,000

0.4523 0.4039 0.3606 0.3220

55,187 49,274 (64,189) 177,085

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276,000 398,000 220,000 770,000

(38,234) 11,039 (53,149) 123,936

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Tax 45%

WACC 12%

NBV 400,000

Sell 200,000

2004 2005 2006 2007 2008 2009 2010 2011

OLD EQUIPMENT

Years 0 1 2 3 4 5 6 7

Nett Investment

Equipment Cost

Additional Working Capital

Operating Cash Flow

Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000

Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)

Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)

Direct cost (labor) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000)

Depreciation (80,000) (40,000) (40,000) (40,000) (40,000) (40,000)

EBIT 120,000 160,000 160,000 160,000 160,000 160,000

Tax (54,000) (72,000) (72,000) (72,000) (72,000) (72,000)

Nett Income 66,000 88,000 88,000 88,000 88,000 88,000

Add depreciation 80,000 40,000 40,000 40,000 40,000 40,000

146,000 128,000 128,000 128,000 128,000 128,000

2004 2005 2006 2007 2008 2009 2010 2011

NEW EQUIPMENT

Years 0 1 2 3 4 5 6

Nett Investment

Equipment Cost ###

Additional Working Capital 200,000

original cash flow inyear 2005 (noaccumulation for newequipment

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Tax reduction sell below NBV 90,000

(710,000)

Operating Cash Flow

Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000

Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)

Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)

Direct cost (labor) (900,000) (900,000) (900,000) (900,000) (900,000) (900,000)

Cost Saving 200,000 200,000 200,000 200,000 200,000 200,000

Depreciation (333,333) (133,333) (66,667) (66,667) (66,667) (66,667)

EBIT 66,667 266,667 333,333 333,333 333,333 333,333

Tax (30,000) (120,000) (150,000) (150,000) (150,000) (150,000)

Nett Income 36,667 146,667 183,333 183,333 183,333 183,333

Add depreciation 333,333 133,333 66,667 66,667 66,667 66,667

(710,000) 370,000 280,000 250,000 250,000 250,000 250,000

Differential Cash Flow (710,000) 224,000 152,000 122,000 122,000 122,000 122,000PV of 1 factor 1.0000 0.8929 0.7972 0.7118 0.6355 0.5674 0.5066

Present Value (710,000) 200,000 121,173 86,837 77,533 69,226 61,809

Accumulated Cash Flow (486,000) (334,000) (212,000) (90,000) 32,000 154,000

Accumulated PV to CF (510,000) (388,827) (301,989) (224,456) (155,230) (93,421)

Present Value 833,936

Net Present Value 123,936

Internal rate of return 16.32%

Profitability index 1.175

Payback Period 4.74

Discounted Payback 7.78

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2012 2013 2014 2015

8 9 10

300,000

300,000

2,000,000 2,000,000 2,000,000

(300,000) (300,000) (300,000)(600,000) (600,000) (600,000)

(900,000) (900,000) (900,000)

(40,000) (40,000) (40,000)

160,000 160,000 160,000

(72,000) (72,000) (72,000)

88,000 88,000 88,000

40,000 40,000 40,000

128,000 128,000 428,000

2012 2013 2014 2015

7 8 9 10

300,000

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300,000

2,000,000 2,000,000 2,000,000 2,000,000

(300,000) (300,000) (300,000) (300,000)

(600,000) (600,000) (600,000) (600,000)(900,000) (900,000) (900,000) (900,000)

200,000 200,000 200,000 200,000

(66,667) (66,667) (66,667) (66,667)

333,333 333,333 333,333 333,333

(150,000) (150,000) (150,000) (150,000)

183,333 183,333 183,333 183,333

66,667 66,667 66,667 66,667

250,000 250,000 250,000 550,000

122,000 122,000 (178,000) 550,000

0.4523 0.4039 0.3606 0.3220

55,187 49,274 (64,189) 177,085

276,000 398,000 220,000 770,000

(38,234) 11,039 (53,149) 123,936

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Tax 45%

WACC 12%

2004 2005 2006 2007 2008 2009 2010 2011

Years 0 0 1 2 3 4 5 6

Nett Investment

Equipment 1 Cost (600,000)Equipment 2 Cost ###

Sell old Machine -

Tax reduction sell below NBV 180,000

(820,000)

Operating Cash Flow

Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000

Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)

Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)

Direct cost (labor) (900,000) (700,000) (700,000) (700,000) (700,000) (700,000) (700,000)Depreciation 2 (333,333) (133,333) (66,667) (66,667) (66,667) (66,667)

Depreciation (60,000)

EBIT ### 66,667 266,667 333,333 333,333 333,333 333,333

Tax (30,000) (120,000) (150,000) (150,000) (150,000) (150,000)

Nett Income ### 36,667 146,667 183,333 183,333 183,333 183,333

Add depreciation 60,000 333,333 133,333 66,667 66,667 66,667 66,667

### 370,000 280,000 250,000 250,000 250,000 250,000

Nett Casho Flow (600,000) ### 370,000 280,000 250,000 250,000 250,000 250,000

PV of 1 factor 1.00 1.00 0.89 0.80 0.71 0.64 0.57 0.51Present Value (600,000) ### 330,357 223,214 177,945 158,880 141,857 126,658

Accumulated Cash Flow ### ### ### ### (890,000) (640,000) (390,000)

Accumulated PV to CF ### ### ### ### ### ### (881,089)

Present Value 92,513

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Net Present Value (507,487)

Internal rate of return 5.02%

Profitability index 0.751

Payback Period 7.56

Discounted Payback 14.61

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2012 2013 2014 2015

7 8 9 10

2,000,000 2,000,000 2,000,000 2,000,000

(300,000) (300,000) (300,000) (300,000)

(600,000) (600,000) (600,000) (600,000)

(700,000) (700,000) (700,000) (700,000)(66,667) (66,667) (66,667) (66,667)

333,333 333,333 333,333 333,333

(150,000) (150,000) (150,000) (150,000)

183,333 183,333 183,333 183,333

66,667 66,667 66,667 66,667

250,000 250,000 250,000 250,000

250,000 250,000 250,000 250,0000.45 0.40 0.36 0.32

113,087 100,971 90,153 80,493

(140,000) 110,000 360,000 610,000

(768,002) (667,031) (576,879) (496,386)

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Tax 45%

WACC 12%

2004 2005 2006 2007 2008 2009 2010 2011

Years 0 0 1 2 3 4 5 6

Nett Investment

Equipment 1 Cost (600,000)Equipment 2 Cost ###

Sell old Machine 200,000

Operating Cash Flow

Sales 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000

Commision (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) (300,000)

Direct cost (mat) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000) (600,000)

Direct cost (labor) (900,000) (700,000) (700,000) (700,000) (700,000) (700,000) (700,000)

Depreciation 2 (100,000) (100,000) (100,000) (100,000) (100,000) (100,000)Depreciation (60,000) (60,000)

EBIT (860,000) 440,000 300,000 300,000 300,000 300,000 300,000

Tax (198,000) (135,000) (135,000) (135,000) (135,000) (135,000)

Tax reduction sell below NBV 90,000

Nett Income (860,000) 332,000 165,000 165,000 165,000 165,000 165,000

Add depreciation 60,000 160,000 100,000 100,000 100,000 100,000 100,000

(800,000) 492,000 265,000 265,000 265,000 265,000 265,000

Nett Cash Flow (600,000) (800,000) 492,000 265,000 265,000 265,000 265,000 265,000

PV of 1 factor 1.00 1.00 0.89 0.80 0.71 0.64 0.57 0.51Present Value (600,000) (800,000) 439,286 211,256 188,622 168,412 150,368 134,257

Accumulated Cash Flow ### (908,000) (643,000) (378,000) (113,000) 152,000 417,000

Accumulated PV to CF ### (960,714) (749,458) (560,836) (392,424) (242,056) (107,798)

Present Value 803,560

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Net Present Value 203,560

Internal rate of return 15.65%

Profitability index 1.145

Payback Period 4.43

Discounted Payback 6.90

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2012 2013 2014 2015

7 8 9 10

2,000,000 2,000,000 2,000,000 2,000,000

(300,000) (300,000) (300,000) (300,000)

(600,000) (600,000) (600,000) (600,000)

(700,000) (700,000) (700,000) (700,000)

(100,000) (100,000) (100,000) (100,000)

300,000 300,000 300,000 300,000

(135,000) (135,000) (135,000) (135,000)

165,000 165,000 165,000 165,000

100,000 100,000 100,000 100,000

265,000 265,000 265,000 265,000

265,000 265,000 265,000 265,0000.45 0.40 0.36 0.32

119,873 107,029 95,562 85,323

682,000 947,000 1,212,000 1,477,000

12,074 119,103 214,665 299,988

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