The subject is project management Consider Cement Project with the following information, ?The initial investment outlay on the...

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Accounting

The subject is projectmanagement

Consider Cement Project with the following information,
?The initial investment outlay on the project is birr 100million which is consists of 80 million plant and machinery and theremaining 20million is on working capital.
?The entire outlay will be made at the beginning of theproject
?The project will be financed with 50 million of equity
capital and the reaming 50 million of debt financing
? The life of the project is expected to be 5 years.
? At the end of the 5th years a fixed asset will fetch a netsalvage value of birr 30 million where as working capitalliquidated at its book value
? The project is expected to increase the revenue of the firmby 120 m per year.
? The increase in cost on account of the project is expectedto be 80 m per year (this includes all costs items other thandepreciation and tax).
? Plant and machinery will be depreciated at the rate of 25%per year as shown below
?First year ?Second year ?Third year ?Fourth birr ?Fifthyear
20m 15m 11.25m 8.44m 6.33m
? If the effective tax percent will be 30% and interest rateis 10% , given the above information calculate the yearly cash flowof the
project

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3.6 Ratings (614 Votes)

Solution Cash outflow at year 0 Initial investment working capital Cash outflow at year 0 80 million 20 million 100 million Operating cash inflow from year 1 through year 5 Revenue costs depreciation 1 See Answer

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Transcribed Image Text

The subject is projectmanagementConsider Cement Project with the following information,?The initial investment outlay on the project is birr 100million which is consists of 80 million plant and machinery and theremaining 20million is on working capital.?The entire outlay will be made at the beginning of theproject?The project will be financed with 50 million of equitycapital and the reaming 50 million of debt financing? The life of the project is expected to be 5 years.? At the end of the 5th years a fixed asset will fetch a netsalvage value of birr 30 million where as working capitalliquidated at its book value? The project is expected to increase the revenue of the firmby 120 m per year.? The increase in cost on account of the project is expectedto be 80 m per year (this includes all costs items other thandepreciation and tax).? Plant and machinery will be depreciated at the rate of 25%per year as shown below?First year ?Second year ?Third year ?Fourth birr ?Fifthyear20m 15m 11.25m 8.44m 6.33m? If the effective tax percent will be 30% and interest rateis 10% , given the above information calculate the yearly cash flowof theproject