Centurion Cycle Works - Cash Flow Analysis
Selling Price:
R 430 Year Initial Capital Requirements Income from the Salvage of Assets Sales Income Sales Price ( R/unit) Market Size Market Share (%) Sales Volume (units/year) Expenses Direct Material Cost (R/unit) Direct Materials Direct Labour (R/unit) Direct Labour Manufacturing Overhead Costs Selling and Admin Expenses Profit before Loan Payment Loan Payment Cash Flow before Tax Deprecaition Interest Book Value Taxable Income Taxation Cash Flow after Tax Input Table Sales Price (R/unit) Market Growth Rate Inflation Loan Amount Loan Interest Rate Loan Period MARR - before Tax MARR - after Tax R 430.00 3.00% 13.50% R 700,000 15.00% 4 40.00% 25.00%
Inflation Rate:
13.50%
Interest Rate:
15.00% 0 -640,000
-640,000
-640,000
Depreciation Rate Depreciation and Book Values Depreciation - Land Depreciation - Buildings Depreciation - Equipment 0% 5% 20%
Initial Value 150,000 320,000 750,000
Depreciation per Year 0 16,000 150,000
Total Depreciation/Book Value Normal Tax Rate Secondary Tax Rate Dividend Policy Effective Tax Rate Initial Value Salvage Values Land Buildings Equipment Working Capital Total 150,000 320,000 750,000 120,000 1,340,000 28.00% 10.00% 100.00% 35.20% Annual % Salvage Value increase/decrease End Year 6 13.50% 320,676 8.96% 535,491 -15.00% 282,862 13.50% 256,541 1,395,570 Question 3 a Base case Increase/decrease in selling price -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% Sales Price NPV 408.50 412.80 417.10 421.40 425.70 430.00 434.30 438.60 442.90 447.20 451.50 Before Tax IRR -158,751.00 25,835.00 210,421.00 395,007.00 579,593.00 764,179.00 948,765.00 1,133,351.00 1,317,937.00 1,502,523.00 1,687,109.00
166,000
After Tax NPV 34% 41% 48% 55% 62% 70% 77% 85% 92% 100% 108% 21,746.00 185,545.00 349,343.00 513,142.00 676,941.00 840,739.00 1,004,538.00 1,168,337.00 1,332,136.00 1,495,934.00 1,659,733.00
South African rates
Secondary Tax Rate Normal Tax Rate Inflation 28.00% 10.00% 8.50% Before Tax IRR -144,198.00 42,201.00 228,601.00 415,001.00 601,401.00 787,801.00 974,201.00 1,160,601.00 1,347,000.00 1,553,400.00 1,719,800.00 After Tax NPV 35% 42% 49% 56% 63% 70% 78% 85% 93% 101% 108% 68,177.00 243,434.00 418,690.00 593,947.00 769,204.00 944,460.00 1,119,717.00 1,294,974.00 1,470,231.00 1,645,487.00 1,820,744.00
Increase/decrease in selling price -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5%
Sales Price NPV 408.50 412.80 417.10 421.40 425.70 430.00 434.30 438.60 442.90 447.20 451.50
Inflation Cash Flow after Tax
Question 3 b Domain 3.5% ARD CRD (Inflation free) 8.5% ARD CRD (Inflation free) 13.5% ARD CRD (Inflation free)
-640,000 -618,357 -640,000 -589,862 -640,000 -563,877
NPV as afunction of inflation
1,400,000.00 1,200,000.00 1,000,000.00 NPV (R)
800,000.00
600,000.00 400,000.00 200,000.00
0.00
3.5%
Question 3 c
8.5% Inflation
13.5%
Interest rate NPV 10% 11% 12% 13% 14%
Before Tax IRR 832,841.00 823,967.00 815,025.00 806,015.00 796,940.00
73% 72% 72% 71% 71%
After Tax NPV 979,994.00 973,006.00 965,957.00 958,850.00 951,684.00
15% 16% 17% 18% 19% 20%
787,801.00 778,598.00 769,332.00 760,004.00 750,617.00 741,170.00
70% 70% 70% 69% 69% 68%
944,460.00 937,180.00 929,845.00 922,454.00 915,010.00 907,513.00
NPV as afunction of interest rate
1,200,000.00 1,000,000.00 800,000.00
NPV (R)
600,000.00
400,000.00 200,000.00
0.00 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
Interest rate on loan
ow Analysis
1 2 3 4 5 6
1,395,570 5,805,000 430.00 135,000 10.00% 13,500 5,482,500 275.00 3,712,500 60.00 810,000 450,000 510,000 322,500 -245,186 77,314 166,000 105,000 51,500 18,128 59,186 7,600,695 488.05 139,050 11.20% 15,574 7,011,072 312.13 4,860,910 68.10 1,060,562 510,750 578,850 589,623 -245,186 344,438 166,000 83,972 339,651 119,557 224,880 9,837,621 12,613,639 16,047,090 20,280,919 553.94 628.72 713.60 809.93 143,222 147,518 151,944 156,502 12.40% 13.60% 14.80% 16.00% 17,759 20,062 22,488 25,040 8,900,889 11,230,555 14,094,945 17,608,468 354.26 402.09 456.37 517.98 6,291,502 8,066,862 10,262,674 12,970,355 77.29 87.73 99.57 113.01 1,372,691 1,760,043 2,239,129 2,829,896 579,701 657,961 746,786 847,602 656,995 745,689 846,357 960,615 936,732 1,383,084 1,952,145 4,068,022 -245,186 -245,186 691,546 1,137,898 1,952,145 4,068,022 166,000 59,790 710,942 250,252 441,295 166,000 31,981 1,185,103 417,156 720,742 166,000 0 1,786,145 628,723 1,323,422 16,000 374,000 3,678,022 1,294,664 2,773,358
NPV IRR before tax: 1,042,430 77% NPV IRR after tax: 1,233,109 60%
Years
Book Value End Year 6 150,000 6 224,000 5 0
374,000
NPV as a function of selling price
2000000
1500000 After Tax IRR 26% 31% 36% 41% 46% 51% 57% 62% 67% 72% 77%
1000000
NPV (R)
500000
0
408.5 412.8 425.7 430.0 434.3 447.2 451.5
417.1 421.4 438.6 442.9
-500000
Selling Price (R)
After Tax IRR 27% 33% 38% 43% 49% 54% 59% 65% 70% 75% 81% 120%
IRR as a function of selling price
100% 80% IRR (%) 60%
40% 20%
20%
0% 408.50 412.80 417.10 421.40 425.70 430.00 434.30 438.60 442.90 447.20
13.5%
Selling Price (R)
NPV 59,186 57,185 59,186 54,550 59,186 52,146 191,217 184,751 208,049 191,750 224,880 198,133 339,046 327,580 388,992 358,518 441,295 388,806 504,109 487,062 607,438 559,850 720,742 635,015 933,144 901,588 1,114,818 1,027,482 1,323,422 1,166,010 1,827,130 1,765,343 2,253,289 2,076,764 2,773,358 2,443,487 694,546.46 671,059.38 944,460.46 870,470.47 1,233,109.24 1,086,439.86
IRR as a function of inflation
70.00% 60.00%
50.00%
ARD (With inflation)
CRD (Inflation free)
40.00% IRR 30.00%
20.00%
10.00% 0.00%
3.5% 8.5% Inflation After Tax IRR 55% 55% 55% 54% 54%
451.50
54% 54% 53% 53% 53% 53%
IRR as a function of interest rate
80%
70%
60% 50% IRR
Before Tax After Tax
40% 30%
20%
10%
0% 10% 11% 12% 13% 14% 15% 16% 17% 18% Interest rate on loan
Base Case, Before Tax SA rates, Before Tax Base Case, After Tax
SA rates, After Tax
Base Case, Before Tax SA rates, Before Tax
Base Case, After Tax SA rates, After Tax
IRR 48.12% 48.12% 53.90% 53.90% 59.64% 59.64%
ARD (With inflation)
CRD (Inflation free)
erest rate
Before Tax After Tax
18% 19% 20%