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Evaluate The Proposal To Run This Business For 5 Years by Investing 50% in The Business

The document outlines a proposal to open an automobile dealership requiring an initial investment of Rs. 39,050,000 with 50% debt financing at 13% interest over 5 years. It estimates selling 248 vehicles per month across 6 models, with revenues of Rs. 199 million in year 1 growing at 10% annually. Operating expenses are estimated at 30% of revenues. The internal rate of return is calculated at 11%, indicating the projected cash flows from the 5 year investment would provide an 11% annual return.

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Rahul lodha
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110 views5 pages

Evaluate The Proposal To Run This Business For 5 Years by Investing 50% in The Business

The document outlines a proposal to open an automobile dealership requiring an initial investment of Rs. 39,050,000 with 50% debt financing at 13% interest over 5 years. It estimates selling 248 vehicles per month across 6 models, with revenues of Rs. 199 million in year 1 growing at 10% annually. Operating expenses are estimated at 30% of revenues. The internal rate of return is calculated at 11%, indicating the projected cash flows from the 5 year investment would provide an 11% annual return.

Uploaded by

Rahul lodha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

Dealership of a Product - IRR calculations

Requirements Estimate Of Business

Number of
Models Units Sold /
month
Showroom 30,000 sqft
Go Down 60,000 sqft MODEL A 2
Initial Costs MODEL B 24

Initial Rennovation 2,500,000 Rs. MODEL C 2

Deposit for
Showroom (6
months rental) 54,000,000 Rs. MODEL D 20

Deposit for Go Down


(6 Months Rental) 21,600,000 Rs. MODEL E 100

Rental Costs MODEL F 100

Rent for Showroom 300 Rs./Sqft/Month Total Monthly Sales


Rent for Go Down 60 Rs./Sqft/Month
Staff Profit Calculations
Staff No. Salaries
Manager 2 70,000 Rs./Month Revenues
Sales 6 50,000 Rs./Month y/y (%) growth
Admin 4 40,000 Rs./Month Rental - Showroom
Go Down 6 24,000 Rs./Month Rental - Go Down
Increament in
Salaries 20% per year Salaries
Operations &
Maintainance 30% As % of Revenues Operations
Initial Funding Operating profit
Debt - For 5 years 50% Interest Expense
Interest Rate -
Commercial Loan 13% per year Profit Before Tax
Equity 50% Tax @ 35%
Net Profit

Evaluate the proposal to run this business for 5 years by Cash Flow Calculations
investing 50% in the business

Operating Cash Flows


Initial Investment (39,050,000)
Initial Funding Amount Debt amount repaid
At the end of 5 years deposit amount
Debt Raised 39,050,000 would be returned
Equity Raised 39,050,000 Total Cash Flows (39,050,000)
IRR 11%
R calculations

Price Commission (%) Commission (Rs.)

6,000,000 4% 480,000
4,400,000 4% 4,224,000

4,000,000 4% 320,000

2,400,000 3% 1,440,000

2,000,000 3% 6,000,000

1,400,000 3% 4,200,000

16,664,000

1 2 3 4 5
Year - 1 Year - 2 Year - 3 Year - 4 Year - 5
199,968,000 219,964,800 241,961,280 266,157,408 292,773,149
10% 10% 10% 10%
108,000,000 108,000,000 108,000,000 108,000,000 108,000,000
43,200,000 43,200,000 43,200,000 43,200,000 43,200,000

892,800 1,071,360 1,285,632 1,542,758 1,851,310

59,990,400 65,989,440 72,588,384 79,847,222 87,831,945


(12,115,200) 1,704,000 16,887,264 33,567,427 51,889,894
5,076,500 5,076,500 5,076,500 5,076,500 5,076,500

(17,191,700) (3,372,500) 11,810,764 28,490,927 46,813,394


- - 4,133,767 9,971,825 16,384,688
(17,191,700) (3,372,500) 7,676,997 18,519,103 30,428,706

1 2 3 4 5
Year - 1 Year - 2 Year - 3 Year - 4 Year - 5

(17,191,700) (3,372,500) 7,676,997 18,519,103 30,428,706

(39,050,000)
75,600,000
(17,191,700) (3,372,500) 7,676,997 18,519,103 66,978,706
56%
Excel Functions
SUM sum()
freeze cell $
Sumproduct
IF
IRR

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