Case 1

Machine Cost
Life
Cost of Capital
Growth Rate

Cash flows
Year
Case 1
case 2
Case 3

-35000
-35000
-35000

35000
15
12%
Nil

1
5000
4500
4000

2
5000
4500
4160

Case 2

Case 3

Machine Cost35000
Life
15
Cost of Capital12.0%
Growth Rate
Nil

Machine Cost35000
Life
15
Cost of Capital12%
Growth Rate 4%

3
5000
4500
4326

4
5000
4500
4499

5
5000
4500
4679

6
5000
4500
4867

7
5000
4500
5061

8
5000
4500
5264

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31

Case 2
-35000
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500

32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50

4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500
4500

9
5000
4500
5474
Case 3
-35000
4000
4160
4326.4
4499.46
4679.43
4866.61
5061.28
5263.73
5474.28
5693.25
5920.98
6157.82
6404.13
6660.29
6926.71
7203.77
7491.92
7791.6
8103.27
8427.4
8764.49
9115.07
9479.68
9858.86
10253.2
10663.3
11089.9
11533.5
11994.8
12474.6
12973.6

10
5000
4500
5693

11
5000
4500
5921

12
5000
4500
6158

Case 1
Case 2
Case 3

13
5000
4500
6404

Payback NPV
7
8

14
5000
4500
6660

15
5000
4500 ..
6927 ..

IRR

Decision

PV of CF
($34,054.32)

13492.5
14032.2
14593.5
15177.3
15784.4
16415.7
17072.4
17755.3
18465.5
19204.1
19972.2
20771.1
21602
22466.1
23364.7
24299.3
25271.3
26282.1
27333.4

Project
Add a New Window
Update Existing Equipment
Build a New Stand
Rent a Larger Stand
Discount Rate

Investment Year 1
Year 2
Year 3
-75000
44000
44000
44000
-50000
23000
23000
23000
-125000
70000
70000
70000
-1000
12000
13000
14000
15%

NPV
25462
2514
34826
28470

IRR
34.62%
18.01%
31.21%
1207.61%

A
B
C
D

Year
CF
Discount rate
Discount rate

0
-1000000
25%
20%

1
371739

2
371739

IRR
NPV
Pay back
ARR

18%
-122,101
-2.69
0.243478

PV of Cash Inflows
2 year cash inflows
NPV @20%
ARR

Subsidy
-877,899 ($122,101)
743478
-256522
-37666
-112,666 Now
313044

3
371739

4 Total CF
371739 1486956

True Value of Tri Star at Planned 210 units of Production

Year

time
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977

0
1
2
3
4
5
6
7
8
9
10

Investment Production Costs Revenue Total Cash Flow

-100
-100
-200
-200
-200
-200
-200
$140
-60
-200
($490)
$140
-550
($490)
$560
70
($490)
$560
70
($490)
$560
70
($490)
$560
70
($490)
$420
-70
$420
420

Total

-900

Production Margin
Net Projected Profit
NPV @
10%

420 Million
-480 Million
-584 Million

-2940

3360

-480

210 units of Production

Total production in 6 Years
Avearge Production per year
Cost of Production per Aircraft
Total Production cost per year
Advance payment per aircraft
Total advance payment
Payment on delivery (per aircraft)
Total payment on delivery
Total revenue per Aircraft
Total revenue per year

210
35
$14
$490
$4
$140
$12
$420
$16
$560

million
million
million
million
million
million
million
million

Sensitivity Analysis
No. of Units Produces
Avg. Cost NPV
300
400
500