NET PRESENT VALUE
Year 0 Year 1 Year 2
2017 2018 2019
Investment amount -
Industry research - sunk cost
* show inclusion or exclusion & provide reasons (dep., sunk, relevant cost etc.)
* Use the CAPEX
Working capital
* Note when working capital is required & by how much it needs to be added back
Revenue + +
Cost of Sales - -
Operating costs - -
* different to Cost of sales , must be "cash"
* Can be a tender split over the years to manage the operation
Variable costs - -
fixed costs - -
Net cashflows before tax
less : Tax at 28% - -
Net cashflows
INPUT Keys Cf0 Cf1 Cf2
I/Y = %
Net present Value (accept if positive)
TAXATION Year 0 Year 1 Year 2
Gross Profit ( sales - Cost of sales) + + +
Operating costs - - -
Fixed costs - - -
Variable costs - - -
wear & tear - - -
* capital allowance granted by SARS not depreciation.
Scrapping allowance (-) / Recoupment (+) x
Taxable income
Taxation at 28%
*the company's capital budgeting projects tax rate
Notes & Exam Technique
1. Figures could be scaled down by R'000 to save time & for neat presentation
2. If you are deciding if you should sell or repair an asset the investment amount
is the oppurtunity cost + the repair cost.
3. The years are only for the REMAINING Useful life
4.The scrapping allowance forfeited
(market value - tax base)
Tax base (cost price - ACCUMULATED Wear & Tear)
5. Use the factor as I (discount rate, required return, WACC)
6. Estimated scrapping value is positive
7. Check if the info says daily.
8. Remove depreciation from fixed costs
9. Don't accumulate wear &tear
10. What is production for the year ?
11. Do not add backa cancellation fee, deposit etc. unless it is stipulated to be reclaimed
12. Make sure salaries are PER ANNUM
Year 0 Year 1 Year 2
2017 2018 2019
Investment amount -
Industry research - sunk cost
* show inclusion or exclusion & provide reasons (dep., sunk, relevant cost etc.)
* Use the CAPEX
Working capital
* Note when working capital is required & by how much it needs to be added back
Revenue + +
Cost of Sales - -
Operating costs - -
* different to Cost of sales , must be "cash"
* Can be a tender split over the years to manage the operation
Variable costs - -
fixed costs - -
Net cashflows before tax
less : Tax at 28% - -
Net cashflows
INPUT Keys Cf0 Cf1 Cf2
I/Y = %
Net present Value (accept if positive)
TAXATION Year 0 Year 1 Year 2
Gross Profit ( sales - Cost of sales) + + +
Operating costs - - -
Fixed costs - - -
Variable costs - - -
wear & tear - - -
* capital allowance granted by SARS not depreciation.
Scrapping allowance (-) / Recoupment (+) x
Taxable income
Taxation at 28%
*the company's capital budgeting projects tax rate
Notes & Exam Technique
1. Figures could be scaled down by R'000 to save time & for neat presentation
2. If you are deciding if you should sell or repair an asset the investment amount
is the oppurtunity cost + the repair cost.
3. The years are only for the REMAINING Useful life
4.The scrapping allowance forfeited
(market value - tax base)
Tax base (cost price - ACCUMULATED Wear & Tear)
5. Use the factor as I (discount rate, required return, WACC)
6. Estimated scrapping value is positive
7. Check if the info says daily.
8. Remove depreciation from fixed costs
9. Don't accumulate wear &tear
10. What is production for the year ?
11. Do not add backa cancellation fee, deposit etc. unless it is stipulated to be reclaimed
12. Make sure salaries are PER ANNUM
