Non-Current Asset Analysis and Sensitivity Analysis for Business Finance

This document provides an analysis of non-current assets and sensitivity analysis for business finance. It includes tables and calculations for depreciation, cash inflows and outflows, and NPV for best and worst-case scenarios.

FINANCE FOR BUSINESS 1
FINANCE FOR BUSINESS

FINANCE FOR BUSINESS 2
Section 2.3: Non-current asset analysis:
The following table shows the non-current assets analysis:
(Amounts in $ in millions)
Particulars 2019 2018 2017
$
change
%
change
Investments
1.2
0
1.9
0
2.9
0
-
1.70 58.62%
Deferred contract costs
5.4
0
4.8
0 -
5.4
0
Derivative financial assets
0.2
0 - -
0.2
0
Property, plant and
equipment
1,355.1
0
1,249.0
0
1,055.5
0
299.6
0 -28.38%
Spectrum assets
1,334.6
0
1,479.7
0
216.3
0
1,118.3
0
-
517.01
%
Goodwill and other
intangibles
2,350.8
0
2,411.2
0
2,416.2
0
-
65.40 2.71%
Deferred tax assets
45.4
0 - -
45.4
0
Prepayments and other
assets
6.9
0
7.2
0
8.9
0
-
2.00 22.47%
Total
5,099.6
0
5,153.8
0
3,699.8
0
(TPG Telecom, 2019).
The following table shows the calculation of the % of depreciation:
2019 2018 2017
Amounts of
depreciation
133.2
0
138.8
0
141.1
0
Value
1,355.1
0
1,249.0
0
1,055.5
0
Rate of depreciation
9.8
3
11.1
1
13.3
7

FINANCE FOR BUSINESS 3
The company may have used Written down value method for the purposes of charging
deprecation. This is due to the fact that the depreciation charged by the company during the
year 2019 is @ 9.83% whereas the depreciation charged by it during the year 2018 was 11.11
and during 2017 was 13.37.
This rate is decreasing which is mainly done in the written down value method.
Whenever an asset is to be purchased for a project, then the same would be treated as an
operating cash outflow at period 0. The deprecation charged on this asset would allow tax
savings for the company and there is some salvage value which is recoverable at the end of
the period of the project. So, considering all these options and factors, the net present value is
calculated.
Section 2.4: Sensitivity analysis:
The following are the relevant calculations:
Particulars 0 1 2 3 4
Units
4,50,00
0.00
4,50,00
0.00
4,50,00
0.00
4,50,00
0.00
SP
2
5.00
2
5.00
2
5.00
2
5.00
Cash inflows:
Sales
112,50,00
0.00
112,50,00
0.00
112,50,00
0.00
112,50,00
0.00
Less: variable costs
67,50,00
0.00
67,50,00
0.00
67,50,00
0.00
67,50,00
0.00
Less: depreciation
5,00,00
0.00
5,00,00
0.00
5,00,00
0.00
5,00,00
0.00
Less: fixed costs
4,50,00
0.00
4,50,00
0.00
4,50,00
0.00
4,50,00
0.00
Earnings before
taxes
35,50,00
0.00
35,50,00
0.00
35,50,00
0.00
35,50,00
0.00
Less: taxes @30%
10,65,00
0.00
10,65,00
0.00
10,65,00
0.00
10,65,00
0.00
Earnings after taxes
24,85,00
0.00
24,85,00
0.00
24,85,00
0.00
24,85,00
0.00
Salvage value of
machinery
5,00,00
0.00
Total cash inflows
24,85,00
0.00
24,85,00
0.00
24,85,00
0.00
29,85,00
0.00

FINANCE FOR BUSINESS 4
Cash outflows:
Machinery
25,00,00
0.00
Working capital
8,00,00
0.00
Total cash outflows
-
25,00,000.
00 - - -
-
8,00,000.0
0
Total cash flows -2500000
24,85,00
0.00
24,85,00
0.00
24,85,00
0.00
16,85,00
0.00
NPV@12%
40,53,03
4.52
Conclusion: the project should be accepted since it has a positive NPV.
Worst case scenario:
Particulars 0 1 2 3 4
Units
4,27,
500.00
4,27,
500.00
4,27,5
00.00
4,27,5
00.00
SP 23.75 23.75 23.75 23.75
Cash inflows:
Sales
101,53,
125.00
101,53,
125.00
101,53,1
25.00
101,53,1
25.00
Less: variable
costs
76,95,
000.00
76,95,
000.00
76,95,0
00.00
76,95,0
00.00
Less: depreciation
5,00,
000.00
5,00,
000.00
5,00,0
00.00
5,00,0
00.00
Less: fixed costs
5,50,
000.00
5,50,
000.00
5,50,0
00.00
5,50,0
00.00
Earnings before
taxes
14,08,
125.00
14,08,
125.00
14,08,1
25.00
14,08,1
25.00
Less: taxes @30%
4,22,
437.50
4,22,
437.50
4,22,4
37.50
4,22,4
37.50
Earnings after
taxes
9,85,
687.50
9,85,
687.50
9,85,6
87.50
9,85,6
87.50

FINANCE FOR BUSINESS 5
Salvage value of
machinery
5,00,0
00.00
Total cash
inflows
9,85,
687.50
9,85,
687.50
9,85,6
87.50
14,85,6
87.50
Cash outflows:
Machinery
25,00,0
00.00
Working capital
8,00,0
00.00
Total cash
outflows
-
25,00,000.
00 - - -
-
8,00,000.0
0
Total cash flows -2500000
9,85,
687.50
9,85,
687.50
9,85,6
87.50
1,85,6
87.50
NPV@12%
-
12,979.62
Conclusion: the project should be accepted since it has a negative NPV.
Best case scenario:
Particulars 0 1 2 3 4
Units
5,40,
000.00
5,40,
000.00
5,40,
000.00
5,40
,000.00
SP 30.00 30.00 30.00 30.00
Cash inflows:
Sales
162,00,
000.00
162,00,
000.00
162,00,
000.00
162,00
,000.00
Less: variable
costs
97,20,
000.00
97,20,
000.00
97,20,
000.00
97,20
,000.00
Less: depreciation
5,00,
000.00
5,00,
000.00
5,00,
000.00
5,00
,000.00
Less: fixed costs
5,50,
000.00
5,50,
000.00
5,50,
000.00
5,50
,000.00
Earnings before
taxes
54,30,
000.00
54,30,
000.00
54,30,
000.00
54,30
,000.00

FINANCE FOR BUSINESS 6
Less: taxes
@30%
16,29,
000.00
16,29,
000.00
16,29,
000.00
16,29
,000.00
Earnings after
taxes
38,01,
000.00
38,01,
000.00
38,01,
000.00
38,01
,000.00
Salvage value of
machinery
5,00
,000.00
Total cash
inflows
38,01,
000.00
38,01,
000.00
38,01,
000.00
43,01
,000.00
Cash outflows:
Machinery
25,00,0
00.00
Working capital
8,00
,000.00
Total cash
outflows
-
25,00,00
0.00 - - -
-
8,00,000.00
Total cash flows -2500000
38,01,
000.00
38,01,
000.00
38,01,
000.00
30,01
,000.00
NPV@12%
76,21
,920.00
Conclusion: the project should be accepted since it has a positive NPV.
NPV Senstivity:
The following table shows the sensitivity:
Particulars NPV Senstivity
40,53,034.5
2
Worst
-
12,979.62 99.680%
Best
76,21,920.0
0 88.055%

FINANCE FOR BUSINESS 7

FINANCE FOR BUSINESS 8
References
Tpg.com.au. (2019). TPG Investor Relations. [online] Available at:
https://www.tpg.com.au/about/investorrelations.php [Accessed 26 Sep. 2019].