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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