Estimate cash flows and NPV

The following data is available for a project:

Initial investment = Rs 10 crore (incl. working capital of Rs 2.5 crore)

Expected life = 8 years

Salvage value = 50 percent of initial investment

First year sales = Rs 6 crore

Growth rate in sales = 7.5 percent

Operating profit margin = 10 percent

Tax rate = 35 percent Cost of capital = 17 percent

Increase in W.C. = 5 percent

Depreciation is provided on a straight-line basis. Estimate cash flows and NPV. Conduct a sensitivity analysis by changing key assumptions

Solution: