Bhimsen Co. case- Ross et al.
Using straight line method of depreciation:
Year Units Price per unit Cost per unit Revenue Operating Cost
1 5000 20 10 100000 50000
2 8000 20.4 11 163200 88000
3 12000 20.808 12.1 249696 145200
4 10000 21.22416 13.31 212241.6 133100
5 6000 21.6486432 14.641 129891.8592 87846
Cash:
Working Capital
Change in Working Capital
Cash Inflow
Warehouse
Year Depreciation MACRS Book Value Terminal Value
0 100000
1 0.2 80000
2 0.32 48000
3 0.192 28800
4 0.1152 17280 Profit Additional tax
5 0.1152 5760 30000 24240 8241.6
raight line method of depreciation: Depreciation per year 14000
Tax Rate 34%
EBDIT=Revenue - Operating Cost Depreciation PBT Tax PAT Depreciation
50000 14000 36000 12240 23760 20000
75200 14000 61200 20808 40392 32000
104496 14000 90496 30768.64 59727.36 19200
79141.6 14000 65141.6 22148.14 42993.46 11520
42045.8592 14000 28045.86 9535.592 18510.27 11520
0 1 2 3 4 5
-250000 150000
-10000 10000 16320 24969.6 21224.16 0
0 -6320 -8649.6 3745.44 21224.16
43760 72392 78927.36 54513.46 30030.26707
150000
Net Earnings on Sale
21758.4
Cash Inflow=PAT+Depreciation Change in Working Capital Net Cash Inflow= Cash Inflow + Change in WC
43760 0 43760
72392 -6320 66072
78927.36 -8649.6 70277.76
54513.456 3745.44 58258.896
30030.267072 21224.16 51254.427072
