Dynatronics, Inc. (Abridged)
1.
EVALUATION OF THE NEW PROJECT | | | | | | | | | | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | INITIAL INVESTMENT | -250 | | | | | | | INCREASE IN WC | -1300 | -1690 | -1690 | -1560 | -1300 | -780 | -260 | TOTAL OUTFLOWS | -1550 | -1690 | -1690 | -1560 | -1300 | -780 | -260 | PVF @11.7% | 0.89525 | 0.80148 | 0.71753 | 0.64237 | 0.57508 | 0.5148 | 0.4609 | PV | -1387.65 | -1354.5 | -1212.63 | -1002.1 | -747.61 | -401.583 | -119.84 | PV OF CASH OUTFLOWS | -6225.92 | | | | | | | EBIT | 870 | 1,131 | 1,131 | 1,044 | 870 | 522 | 174 | START UP MARKETING EXPENSES | -90 | 0 | 0 | 0 | 0 | 0 | 0 | ADJUSTMENTS FOR DEPRECIATION: | | | | | | | | ADD: SLM DEPRECIATION | 50 | 50 | 50 | 50 | 50 | 0 | 0 | LESS: SYD DEPRECIATION | -83.3 | -66.7 | -50 | -33.3 | -16.7 | 0 | 0 | ADJUSTED EBIT | 746.7 | 1,114 | 1,131 | 1,061 | 903 | 522 | 174 | LESS: TAX @40% | 298.68 | 445.72 | 452.4 | 424.28 | 361.32 | 208.8 | 69.6 | PAT | 448.02 | 668.58 | 678.6 | 636.42 | 541.98 | 313.2 | 104.4 | ADD: DEPRECIATION | 83.3 | 66.7 | 50 | 33.3 | 16.7 | 0 | 0 | CASH FLOWS AFTER TAX | 531.32 | 735.28 | 728.6 | 669.72 | 558.68 | 313.2 | 104.4 | RECOVERY OF WORKING CAPITAL | | | | | | | 8580 | TOTAL CASH FLOWS | 531.32 | 735.28 | 728.6 | 669.72 | 558.68 | 313.2 | 8684.4 | PVF @11.7% | 0.89525 | 0.80148 | 0.7175 | 0.64237 | 0.57508 | 0.51485 | 0.4609 | PV | 475.667 | 589.313 | 522.7929 | 430.21 | 321.29 | 161.25 | 4002.83 | PV OF INFLOWS | 6503.359 | | | | | | | NPV | 277.4432 | | | | | | | IRR | 2% | | | | | | |

2. The IRR of the project is coming to be 2%. As the cost of the project is 11.7% and the IRR of the project is lower than cost of the project, the project can’t be accepted. This is because of the high working capital investment on the part of the company