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Assignment Question: Ghani Textiles Industry is a large producer of silk fabrics in the local market. The management has decided to install four new Air Jet Looms (AJ-500 Model) for the manufacturing of premium quality Silk Fabric, which will increase the overall production of the organization by 55 percent. The Production department has submitted the project proposal that estimates the investment requirements as follow: Initial Investment required for the new AJ-500 Loom is Rs. 212,500 each which will be paid in the first year to the importer. Furthermore, an amount of Rs. 275,000 is required for the installation of the machines. Delivery and installation of the machine is estimated to take almost one year. The production manager also estimated that an amount of Rs. 25,000 annually required for the repair and maintenance of these machines. The total useful life of the machines is five years with an estimated salvage value of Rs. 116,250 each. The project schedule calls for the benefits to begin in the second year and a project profit is estimated to be Rs. 495,000, Rs. 515,000, Rs. 525,000 and Rs.424,000 in the 2nd, 3rd, 4th and 5th years respectively. The project manager has an estimated hurdle rate of 13% for this investment and the expected rate of inflation is 3.5 percent over the life of the project. The management has hired you as a consultant and given the task to evaluate the proposal using the following format and provide working where required: 

Capture.JPG

Years

Inflow

Outflow

Net flow

Discount Factor

Net Present Value

Year – 1

 

 

 

 

 

Year – 2

 

 

 

 

 

Year – 3

 

 

 

 

 

Year – 4

 

 

 

 

 

Year – 5

 

 

 

 

 

Total

 

 

 

 

 

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plzzz need solution

i completed this assignment any one want to ask something?

    Years

     Inflows

   Outflows

   Net flows

Discount rate 13%

Net present value

    Year  1

           -

     487500

           -

       1.000

   (487500)

 inflows:

y2 495000

y3 515000

y4 525000

y5 424000( Salvage value+ inflows)

inflow=424000

salvage value=116250

424000+116250=540250

but their 640250 ? how

outflows:

y 1 487500 ( 212500+275000)

y2 25000

y3 25000

y4 25000

y5 25000

wat is your total net flow 

plz share complete work :)

@niceboy

total net flows = 2005616

net flows = inflows-outflows-inflation rate ( 1-0.035)

 year 2 = 495000-25000 *0.965 = 453550

year 2 net present value = 453550*discount factor(0.783) = 355130

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