Project Evaluation for AllCure Inc.

PROJECT EVALUATION FOR ALLCURE INC.

Executive Summary
The report outlines two investment proposal i.e T-REC and P-REC and the feasibility
study on the basis of various parameters. In this regard, an in-depth analysis has been
conducted in the report to understand both qualitative and quantitative aspect of the
project.
The parameter that have been analysed in the report includes:
(a) Net Present Value;
(b) Profitability Index;
(c) Internal Rate of Return;
(d) Discounted Payback Period
On the basis of above results and considering qualitative aspect of the project final
conclusion has been reached i.e. both projects are feasible when discounted @ 18%.
However, Project T-REC is not feasible @24%. The detailed report has been
presented here-in-below.

TABLE OF CONTENT
Executive Summary..............................................................2
Introduction..........................................................................4
Findings................................................................................4
4.1 Quantitative Findings (P-REC).....................................4
4.2 Quantitative Findings (T-REC).....................................8
4.3 Qualitative Findings..................................................10
Recommendation and Justifications...................................11
Detail Comparison and Further Recommendation.............11
Conclusion..........................................................................11

Introduction
The report deals with detailed analysis of the two projects that have been proposed to
be undertaken by the company i.e. T-REC and P-REC on various parameters. The
project has been conducted to understand whether to undertake the project, if yes,
which project should be undertaken and then evaluation of such project on the
qualitative parameters.
Findings
4.1 Quantitative Findings (P-REC)
Before analysing the findings made in Appendix attached to the document, it shall be
important to understand assumptions which are undertaken to understand the results
better:
(a) Expenditure incurred towards training expense of human resource is a capital
expenditure and the same is not depreciable. Further, no tax benefit is available on
same;
(b) The duration of project is 8 years;
(c) Renovation cost is depreciable and has been depreciated over 8 years
(d) The asset has been sold at the end of 8 years;
(e) Loss on sale and corresponding tax benefit on the same has been considered for
analysis purpose;
(f) Working capital has been realised at the end of the project;
(g) R&D expenditure has been considered as sunk cost and not tax deductible.
On the basis of analysis have been conducted based on 4 parameters, the information n
the same has been detailed here-in-below:
(a) Discounted Payback period: Under the said tool of capital budgeting, the period
under which the initial cash outflow shall be realised is taken into consideration.
Further, the method pay importance to time value of money and discounting to
cash flows realised over the period is carried to ascertain the present value of the
cash flows.
In the case of P-REC, cash flows have been discounted at 18% and 24% to
understand the discounted payback period of the project. Accordingly, the
discounted payback period of the project stands at 5.25 years and 6.43 years
respectively which is greater than 5 years. Further, a brief snapshot of the
computation is provided here-in-below:

Sl
NO Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Terminal
Value
1
Operating Cash flow
before Tax -2890000 748060 748060 748060 748060 1336060 1336060 1336060 1336060 310000
2 Tax -224418 -224418 -224418 -224418 -400818 -400818 -400818 -400818 27600
3 Depreciation 306000 306000 306000 306000 306000 306000 306000 306000
4 Net Operating Cash flow -2890000 829642 829642 829642 829642 1241242 1241242 1241242 1241242 337600
5 Discounting Factor @18% 1
0.84745
8
0.71818
4
0.60863
1 0.515789
0.43710
9 0.370432 0.313925 0.266038
0.266038
164
6 Discounted Cash Flow -2890000
703086.
4 595836
504945.
7 427920.1
542558.
3 459795.2 389656.9 330217.7
89814.48
408
7 Net Present Value 1153831
8 Cumulative -2890000
-
218691
4
-
159107
8
-
108613
2 -658212 -115653 344141.8 733798.7 1064016
1153830.
921
9
Discounted Pay back
period 5.251532
10 Discounting Factor @24% 1
0.80645
2
0.65036
4
0.52448
7 0.422974
0.34110
8 0.275087 0.221844 0.178907
0.178906
664
11 Cumulative -2890000
-
222093
4
-
168136
4
-
124622
8 -895311 -471914 -130464 144898 366964.4
427363.3
353
12
Discounted Pay back
period 6.473792
The project is not feasible based on the requirement of the organisation to have discounted payback period less than 5 yeats.