A Note On The Financial Evaluation Of Projects
 <<Previous
CASH FLOWS FROM TOTAL FUNDS POINT OF VIEWWhen cash flows are computed from the total funds point of view, the funds contributed by all the suppliers of funds towards the project are considered for the calculation of the initial investment. The operating cash flows are calculated by adding profit after taxes, depreciation, non-cash charges, interest on long term borrowing (1-T) and interest on short term borrowing (1-T). The terminal flow will be equal to the net salvage value of fixed assets and net recovery of WC margin.
Consider the same example given above. The net cash flows from the total funds point of view
will be
Cash Flows (Total Funds Point of View)
|
Year
|
0
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
|
Investment
|
-356
|
|
|
|
|
|
|
|
|
|
Initial flow
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
340
|
340
|
340
|
340
|
340
|
340
|
340
|
340
|
|
Op. costs
|
|
145.5
|
150.68
|
155.07
|
158.81
|
162
|
164.7
|
167
|
168.94
|
|
Depreciation
|
|
34.5
|
29.32
|
24.93
|
21.19
|
18
|
15.3
|
13
|
11.06
|
|
Int. LT
|
|
18
|
18
|
18
|
15
|
12
|
9
|
6
|
3
|
|
Int. WC
|
|
9.12
|
9.12
|
9.12
|
9.12
|
9.12
|
9.12
|
9.12
|
9.12
|
|
PBT
|
|
132.88
|
132.88
|
132.88
|
135.88
|
138.88
|
141.88
|
144.88
|
147.88
|
|
Tax
|
|
53.15
|
53.15
|
53.15
|
54.35
|
55.55
|
56.75
|
57.95
|
59.15
|
|
PAT
|
|
79.73
|
79.73
|
79.73
|
81.53
|
83.33
|
85.13
|
86.93
|
88.73
|
|
Op. Flow*
|
|
130.5
|
125.32
|
120.93
|
117.19
|
114
|
111.3
|
109
|
107.06
|
|
NSV of F. Assets
|
|
|
|
|
|
|
|
|
62.7
|
|
Net Recovery of WC margin
|
|
|
|
|
|
|
|
|
25
|
|
Terminal Flow
|
|
|
|
|
|
|
|
|
87.7
|
|
NCF
|
-356
|
130.5
|
125.32
|
120.93
|
117.19
|
114
|
111.3
|
109
|
194.76
|
|
(Rs. in millions)
|
*Operating Flow = PAT + Depreciation + Interests on long
and short-term loans (1 – T)
CHOICE OF DISCOUNT RATE
APPRAISAL CRITERIA
DISCOUNTED CASH FLOW/TIME ADJUSTED TECHNIQUES
NET PRESENT VALUE
APPRAISAL TECHNIQUES IN PRACTICE FOR VARIOUS TYPES OF PROJECTS
CONCLUSION
EXHIBIT I ASPECTS OF PROJECT APPRAISAL
EXHIBIT II PROJECT EVALUATION TECHNIQUES
2010, ICMR (IBS Center for Management Research).All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted
in any form or by any means - electronic or mechanical, without permission.
To order copies, call +91- 8417- 236667 or write to ICMR,
Survey No. 156/157, Dontanapalli Village, Shankerpalli Mandal,
Ranga Reddy District,
Hyderabad-501504.
Andhra Pradesh, INDIA.
Mob: +91- 9640901313, Ph: +91- 8417- 236667,
Fax: +91- 8417- 236668
E-mail: info@icmrindia.org
Website: www.icmrindia.org
|
More Classifications...