Grace Corporation (Managerial Finance)

Name Wajahat Ali P0=D1/r-g 10.41

Roll Number 2024-04-0039 WACC 8.62

Small Addition
Tax Rate 46%
Discount Rate 10.62%

Year 1996 1997 1998 1999 2000 2001 2002

Time 0 1 2 3 4 5 6
Demand Units 53,750 61,000 71,050 81,700 93,950 108,000 124,000
Units Sale 35,525 49,020 56,370 64,800
Selling price per Unit 1,675 1,776 1,882 1,995 2,115 2,242 2,376
VC per Unit
Sales 0 0 70,870,663 103,660,089 126,354,924 153,966,064
Variable Cost 0 0 (42,522,398) (62,196,054) (75,812,955) (92,379,639)
Fixed cost (10,000,000) (10,400,000) (10,816,000) (11,248,640)
R&D (6,000,000) (1,200,000) (1,200,000) (1,200,000) (1,200,000)
Dep (3,150,000) (4,200,000) (3,950,000) (3,850,000)

EBIT 0 0 13,998,265 25,664,036 34,575,970 45,287,786

Tax @46% 0 0 (6,439,202) (11,805,456) (15,904,946) (20,832,381)
Net Income 0 0 7,559,063 13,858,579 18,671,024 24,455,404
Add: Dep 0 0 10,709,063 18,058,579 22,621,024 28,305,404
Land (4,000,000)
Building (10,000,000)
Machinery (15,000,000)
Tax Advantange
Working Capital (21,261,199) (9,836,828) (6,808,451) (8,283,342) (10,024,902)
Net Cash Flow (4,000,000) (25,000,000) (21,261,199) 872,235 11,250,129 14,337,682 18,280,503

NPV 84,823,909
 Buy Computer
Discount Rate 8.62%

Year 1996 1997 1998 1999 2000 2001 2002

t 0 1 2 3 4 5 6
Market size 53,750 61,000 71,050 81,700 93,950 108,000 124,000
Units Sale 35,525 49,020 56,370 64,800
Selling price per Unit 1,675 1,776 1,882 1,995 2,115 2,242 2,376
VC per Unit
Sales 0 0 70,870,663 103,660,089 126,354,924 153,966,064
Variable Cost 0 0 (49,609,464) (72,562,063) (88,448,447) (107,776,245)
Fixed cost (7,500,000) (7,800,000) (8,112,000) (8,436,480)
R&D (6,000,000) (1,200,000) (1,200,000) (1,200,000) (1,200,000)
Dep (2,520,000) (3,360,000) (3,160,000) (3,080,000)

EBIT 0 0 10,041,199 18,738,027 25,434,477 33,473,339

Tax @46% 0 0 (4,618,951) (8,619,492) (11,699,860) (15,397,736)
Net Income 0 0 5,422,247 10,118,534 13,734,618 18,075,603
Add: Dep 0 0 7,942,247 13,478,534 16,894,618 21,155,603
Land (2,000,000)
Building (8,000,000)
Machinery (12,000,000)
Tax Advantange
Working Capital (21,261,199) (9,836,828) (6,808,451) (8,283,342) (10,024,902)
Net Cash Flow 0 (22,000,000) (21,261,199) (1,894,581) 6,670,084 8,611,276 11,130,702

NPV 118,340,284

Build Large
Discount Rate 11.62%
Year 1996 1997 1998 1999 2000 2001 2002
t 0 1 2 3 4 5 6
Market size 53,750 61,000 71,050 81,700 93,950 108,000 124,000
Units Sale 42,630 49,020 56,370 64,800
Selling price per Unit 1,675 1,776 1,882 1,995 2,115 2,242 2,376
VC per Unit
Sales 0 0 85,044,795 103,660,089 126,354,924 153,966,064
Variable Cost 0 0 (42,522,398) (51,830,045) (63,177,462) (76,983,032)
Fixed cost (15,750,000) (16,380,000) (17,035,200) (17,716,608)
R&D (6,000,000) (1,200,000) (1,200,000) (1,200,000) (1,200,000)
Dep (4,500,000) (5,970,000) (5,610,000) (5,460,000)

EBIT 0 0 21,072,398 28,280,045 39,332,262 52,606,424

Tax @46% 0 0 (9,693,303) (13,008,821) (18,092,841) (24,198,955)
Net Income 0 0 11,379,095 15,271,224 21,239,422 28,407,469
Add: Dep 0 0 15,879,095 21,241,224 26,849,422 33,867,469
Land (4,000,000)
Building (15,000,000)
Machinery (21,000,000)
Tax Advantange
Working Capital (25,513,439) (5,584,588) (6,808,451) (8,283,342) (10,024,902)
Net Cash Flow (4,000,000) (36,000,000) (25,513,439) 10,294,506 14,432,774 18,566,080 23,842,568

NPV 147,724,784
nagerial Finance)

on

2003 2004 2005 2006 2007 2008

7 8 9 10 11 12
142,800 164,200 188,850 217,150 249,700
74,400 75,000 75,000 75,000 75,000 75,000
2,519 2,670 2,830 3,000 3,180 3,370

187,382,403 200,227,164 212,240,794 224,975,242 238,473,756 252,782,182

(112,429,442) (120,136,299) (127,344,477) (134,985,145) (143,084,254) (151,669,309)
(11,698,586) (12,166,529) (12,653,190) (13,159,318) (13,685,691) (14,233,118)
(1,200,000)
(3,850,000) (600,000) (500,000) (500,000) (500,000) (500,000)

58,204,376 67,324,337 71,743,128 76,330,779 81,203,812 86,379,755

(26,774,013) (30,969,195) (33,001,839) (35,112,158) (37,353,754) (39,734,687)
31,430,363 36,355,142 38,741,289 41,218,621 43,850,059 46,645,067
35,280,363 36,955,142 39,241,289 41,718,621 44,350,059 47,145,067
6,000,000
3,400,000

(3,853,428) (3,604,089) (3,820,334) (4,049,554) (4,292,528) 75,834,655

31,426,934 33,351,053 35,420,955 37,669,066 40,057,531 132,379,722
er

2003 2004 2005 2006 2007 2008

7 8 9 10 11 12
142,800 164,200 188,850 217,150 249,700
74,400 85,680 98,520 113,310 130,290 149,820
2,519 2,670 2,830 3,000 3,180 3,370

187,382,403 228,739,513 278,799,507 339,892,595 414,276,610 504,957,686

(131,167,682) (160,117,659) (195,159,655) (237,924,817) (289,993,627) (353,470,380)
(8,773,939) (9,124,897) (9,489,893) (9,869,488) (10,264,268) (10,674,839)
(1,200,000)
(3,080,000) (480,000) (400,000) (400,000) (400,000) (400,000)

43,160,782 59,016,957 73,749,960 91,698,290 113,618,715 140,412,467

(19,853,960) (27,147,800) (33,924,981) (42,181,214) (52,264,609) (64,589,735)
23,306,822 31,869,157 39,824,978 49,517,077 61,354,106 75,822,732
26,386,822 32,349,157 40,224,978 49,917,077 61,754,106 76,222,732
6,000,000
2,720,000

(12,407,133) (15,017,998) (18,327,926) (22,315,204) (27,204,323) 151,487,306

13,979,689 17,331,158 21,897,052 27,601,873 34,549,783 236,430,038
 2003 2004 2005 2006 2007 2008
7 8 9 10 11 12
142,800 164,200 188,850 217,150 249,700
74,400 85,680 98,520 113,310 130,290 149,820
2,519 2,670 2,830 3,000 3,180 3,370

187,382,403 228,739,513 278,799,507 339,892,595 414,276,610 504,957,686

(93,691,201) (114,369,756) (139,399,754) (169,946,298) (207,138,305) (252,478,843)
(18,425,272) (19,162,283) (19,928,775) (20,725,926) (21,554,963) (22,417,161)
(1,200,000)
(5,460,000) (900,000) (750,000) (750,000) (750,000) (750,000)

68,605,929 94,307,473 118,720,979 148,470,372 184,833,342 229,311,682

(31,558,727) (43,381,438) (54,611,650) (68,296,371) (85,023,337) (105,483,374)
37,047,202 50,926,035 64,109,329 80,174,001 99,810,005 123,828,308
42,507,202 51,826,035 64,859,329 80,924,001 100,560,005 124,578,308
6,000,000
5,100,000

(12,407,133) (15,017,998) (18,327,926) (22,315,204) (27,204,323) 151,487,306

30,100,069 36,808,037 46,531,402 58,608,797 73,355,682 287,165,614
Depreciation
Small Addition
Year 1996 1997 1998 1999 2000 2001 2002 2003
t 0 1 2 3 4 5 6 7
Building 9% 9% 8% 7% 7%
Building (10,000,000) (900,000) (900,000) (800,000) (700,000) (700,000)
Plant 15% 22% 21% 21% 21%
Plant (15,000,000) (2,250,000) (3,300,000) (3,150,000) (3,150,000) (3,150,000)

Buy Compute
Year 1996 1997 1998 1999 2000 2001 2002 2003
t 0 1 2 3 4 5 6 7
Building 9% 9% 8% 7% 7%
Building (8,000,000) (720,000) (720,000) (640,000) (560,000) (560,000)
Plant 15% 22% 21% 21% 21%
Plant (12,000,000) (1,800,000) (2,640,000) (2,520,000) (2,520,000) (2,520,000)

Build Large
Year 1996 1997 1998 1999 2000 2001 2002 2003
t 0 1 2 3 4 5 6 7
Building 9% 9% 8% 7% 7%
Building (15,000,000) (1,350,000) (1,350,000) (1,200,000) (1,050,000) (1,050,000)
Plant 15% 22% 21% 21% 21%
Plant (21,000,000) (3,150,000) (4,620,000) (4,410,000) (4,410,000) (4,410,000)
 2004 2005 2006 2007 2008
8 9 10 11 12
6% 5% 5% 5% 5%
(600,000) (500,000) (500,000) (500,000) (500,000)

2004 2005 2006 2007 2008

8 9 10 11 12
6% 5% 5% 5% 5%
(480,000) (400,000) (400,000) (400,000) (400,000)

2004 2005 2006 2007 2008

8 9 10 11 12
6% 5% 5% 5% 5%
(900,000) (750,000) (750,000) (750,000) (750,000)