Calculation And Analysis Of Payback Period And Net Present Value For Two Machines And Decision-Making

Machine B    
Calculation of Net Present Value    
Years Cash Outflow After tax Cash Inflow+ Add back depreciation  Factors Cash Inflow PV Cash Outflow PV    
0  OMR  1,10,000   1.00  OMR                   –    OMR   1,10,000.00    
1  OMR     23,500  OMR                                                     46,543.33 0.87  OMR      40,472.46  OMR      20,434.78    
2  OMR     11,000  OMR                                                     41,363.33 0.76  OMR      31,276.62  OMR        8,317.58    
3  OMR     11,000  OMR                                                     40,733.33 0.66  OMR      26,782.83  OMR        7,232.68    
4  OMR     11,000  OMR                                                     41,223.33 0.57  OMR      23,569.57  OMR        6,289.29    
5  OMR     11,000  OMR                                                     52,283.33 0.50  OMR      25,994.06  OMR        5,468.94    
6  OMR     11,000  OMR                                                     49,273.33 0.43  OMR      21,302.22  OMR        4,755.60    
6  OMR     11,000  OMR                                                     12,500.00 0.43  OMR        5,404.09  OMR        4,755.60    
               
 Total   OMR  1,74,801.86  OMR  1,67,254.48    
 NPV= Total Cash Inflow PV -Total cash outflow PV   OMR       7,547.38      
               
Calculation Of Payaback period      
Years Cash Outflow Cash Inflow Cash flows CF      
0 -OMR  1,10,000   -OMR  1,10,000 -OMR        1,10,000      
1 -OMR     23,500  OMR                                                          46,543  OMR     23,043 -OMR           86,957      
2    OMR                                                          41,363  OMR     41,363 -OMR           45,593      
3    OMR                                                          40,733  OMR     40,733 -OMR             4,860      
4    OMR                                                          41,223  OMR     41,223  OMR           36,363      
5    OMR                                                          52,283  OMR     52,283  OMR           88,647      
6    OMR                                                          49,273  OMR     49,273  OMR        1,37,920      
6    OMR                                                          12,500  OMR     12,500  OMR        1,50,420      
Payback period = 3.12      
               
Machine A    
Calculation of Net Present Value    
Years Cash Outflow After tax Cash Inflow+ Add back depreciation  Factors Cash Inflow PV Cash Outflow PV    
0     1.00  OMR                   –    OMR                   –      
1  OMR     26,300  OMR                                                          33,880 0.88  OMR      29,982.30  OMR      23,274.34    
2  OMR     26,300  OMR                                                          35,910 0.78  OMR      28,122.80  OMR      20,596.76    
3  OMR     26,300  OMR                                                          37,100 0.69  OMR      25,712.16  OMR      18,227.22    
4  OMR     26,300  OMR                                                          36,400 0.61  OMR      22,324.80  OMR      16,130.28    
4  OMR     26,300  OMR                                                          12,500 0.61  OMR        7,666.48  OMR      16,130.28    
               
               
               
 Total   OMR  1,13,808.55  OMR     94,358.88    
 NPV= Total Cash Inflow PV -Total cash outflow PV   OMR     19,449.67      
               
Calculation Of Payaback period      
Years Cash Outflow Cash Inflow Cash flows CF      
0  OMR             –      OMR             –    OMR                   –        
1 -OMR     26,300  OMR                                                          33,880  OMR       7,580  OMR             7,580      
2    OMR                                                          35,910  OMR     35,910  OMR           43,490      
3    OMR                                                          37,100  OMR     37,100  OMR           80,590      
4    OMR                                                          36,400  OMR     36,400  OMR        1,16,990      
4    OMR                                                          12,500  OMR     12,500  OMR        1,29,490      
               
               
Payback period = 0.83      
               
Discount Dividend Model            
    Forecast Forecast Forecast Forecast Forecast Forecast
  2017 2018 2019 2020 2021 2022 2023
    1 2 3 4 5 6
Forecast Divdend 20 21.80 23.76 25.90 28.23 30.77 33.54
Forecast Divdend Growth   9.0% 9.0% 9.0% 9.0% 9.0%
Cost of capital 15.00% 1.1500 1.3225 1.5209 1.7490 2.0114 2.3131
Present Value 18.96 17.97 17.03 16.14    
Terminal Value (TV)       512.87    
TV discounted to present value 293.24       470.53    
TV of Dividend 70.10            
Share price (cents) 363.33       309.38    
               
               
               
               
Net Assets Valuation Model              
Total value of Equity                    7.20            
No of Shares Outstanding                    4.00            
Per share value of value of equity                    1.80            
Per share value of value of equity (Cents)                180.00            
               
P/E Model              
P/E ratio of Khalfan                  18.10            
EPS of Masood company                  35.00            
Per share value of value of equity (Cents)                633.50            

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