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6. Payback period (PP) graph - Headings along horizontal axis
- Year; Cash flow; Cumulative cash flow
- Years: 0, 1, 2, 3, 4,
7. Investment in new machinery - cash flow graph (Should investment be taken)
- Years (Horizontal); Vertical - Capital expenditure; Savings; Disposal; Net cash flow; Discount factor; Present value = Net presnt value
- Years (Vertical); Horizontal - Capital expenditure; Savings; Disposal; Net cash flow; Discount factor; Present value = Net presnt value
8. Internal rate of return (IRR)
- The discount rate, which, when applied to the future project cash flows, produces a zero NPV
- If project NPV is positive, it should be accepted; if it is negative it should be rejected
- If competing projects have positive NPVs, the one with the highest NPV is selected
9. Payback period (PP) graph - Headings down the vertical axis
- Years: 0, 1, 2, 3, 4,
- Year; Cash flow; Cumulative cash flow
10. Total investment cost =
- Net profit per unit x replacement number
- Investment cost + total disposal value / 2
- Total cost of unit x replacement number
- Total annual profit / Average annual investment x 100
11. Present Value (PV) =
- Cash Flow x Discount Factor (DF)
- Discount Factor (DF) x Cash Flow
- Discount Factor (DF) - Cash Flow
- Discount Factor (DF) / Cash Flow
12. Total disposal value =
- Net profit per unit x replacement number
- Investment cost + total disposal value / 2
- Sale value per unit x replacement number
- Total annual profit / Average annual investment x 100
13. Average annual investment =
- Total cost of unit x replacement number
- Investment cost + total disposal value / 2
- Net profit per unit x replacement number
- Total annual profit / Average annual investment x 100
14. Average annual profit =
- Total cost of unit x replacement number
- Total anual profit x life time until replacement (yrs) / life time until replacement (yrs)
- Total annual profit / Average annual investment x 100
- Net profit per unit x replacement number
- Investment cost + total disposal value / 2