CASE 8.1 G S PETROPULL COMPANY (GSPC)

Case 8.1 G S Petropull Company (GSPC)

Particulars YearCash fl ows (Rs mn.)

Cum. Cash fl ows (Rs mn.)

Cost of project (Rs million) 250 0 �250 �250Revenue from SEB (Rs million) 120 1 40 �210Revenue from other users (Rs million) 80 2 40 �170Total revenue (Rs million) 200 3 40 �130Cash profi t, 20% from year 1 to 12 (Rs million) 40 4 40 �90Cash profi t, 17% from year 13 to 20 (Rs million) 34 5 40 �50Average cash profi t (Rs million) 37.6 6 40 �10Average investment (Rs million) 125 7 40 30 } PaybackROI 30.1% 8 40 70

9 40 110Discount rate 15% 10 40 150PVFA 12, 15% 5.4206 11 40 190PVFA 20, 15% 6.2593 12 40 230PVFA (20, 12), 15% 0.8387 13 34 264PV of Cash profi t, year 1–12 (Rs million) 216.82 14 34 298PV of Cash profi t, years 13–20 (Rs million) 28.52 15 34 332NPV (Rs millions) �4.66 16 34 366

17 34 40018 34 43419 34 46820 34 502

NPV �4.66IRR 14.65%Pay back �6 years

CASE 8.2 CALMEX COMPANY LTD

Case 8.2 Calmex Company Ltd

Number of tanks 120,000Price (Rs) 700Revenue (Rs million) 84

Small machines

Cost of four small machines (Rs millinon) 60Op. and mfg. cost (Rs) 535Total op. and mfg. cost (Rs million) 64.2Net revenue (Rs million) 19.8Discount rate 12%Project life (years) 6PVFA 6, 12% 4.1114NPV (Rs million) 21.4IRR 13.23%

Large machine

Cost of large machine (Rs million) 120Op. and mfg. cost (Rs) 400Total op. and mfg. cost (Rs million) 48Net revenue (Rs million) 36Discount rate 12%Project life (years) 6PVFA 6, 12% 4.1114NPV (Rs million) 28.0IRR 13.26%

Incremental cash fl ows (large - small machines)

Cost (Rs million) 60Net revenue (Rs million) 16.2Discount rate 12%Project life (years) 6PVFA 6, 12% 4.1114NPV (Rs million) 6.60IRR 15.81%