CTC 475 Review Taxes Types of taxes Income tax is graduated ATCF Calculate Depreciation...
-
date post
19-Dec-2015 -
Category
Documents
-
view
222 -
download
1
Transcript of CTC 475 Review Taxes Types of taxes Income tax is graduated ATCF Calculate Depreciation...
CTC 475 Review Taxes
Types of taxes Income tax is graduated
ATCF Calculate Depreciation BTCF-Depreciation=TI Tax=TI*tax rate ATCF=BTCF-Tax
CTC 475
Methods for Evaluating Uncertainty
Objective Know various methods for evaluating
uncertainty Breakeven Sensitivity OMP Probabilistic (Monte-Carlo)
Breakeven Determine quantity needed to break-even
Example Problem-Breakeven Sales Price $12.50 per unit
Revenues =12.5X Equipment cost $200,000 Overhead cost $50,000 per year O&M $25 per operating hour Production time per 1000 units=100 hours (0.1 hr
per unit) Annual O&M cost=0.1*$25*X=2.5X
Planning horizon 5 years MARR 15%
AW
AW=-$200K(A/P15,5)-$50K-2.5X+12.5X AW=-$109,660-2.5X+12.5X AW=-$109,660+10X If set AW=0
Then X=10,966 (Breakeven Value)
Sensitivity Analysis
Used to analyze effects of varying estimated parameters
Non-probabilistic technique
Sensitivity Example Initial Investment: $10K Annual Receipts: $3K Project Duration: 5 years MARR: 12% AW=-10K(A/P12,5)+$3K= +$226
Varying one parameter at a time +/-40%, determine AW
Vary Annual ReceiptsAW(12%)=-10K(A/P12,5)+3K
(1+X)
X Annual Receipts
AW
-40% 1,800 -974
-30% 2,100 -674
-20% 2,400 -374
-10% 2,700 -74
0 3,000 +226
10% 3,300 +526
20% 3,600 +826
30% 3,900 +1,126
40% 4,200 +1,426
Vary Initial InvestmentAW(12%)=-10K(1+X)(A/P12,5)+
3K
X Initial Investment
AW
-40% 6,000 +1,646
-30% 7,000 +1,079
-20% 8,000 +805
-10% 9,000 +530
0 10,000 +226
10% 11,000 -18
20% 12,000 -293
30% 13,000 -567
40% 14,000 -842
Vary MARRAW(12%)=-10K (A/P12(1+X),5)+3K
X MARR AW
-40% 7.2% +1,646
-30% 8.4% +1,079
-20% 9.6% +805
-10% 10.8% +530
0 12% +226
10% 13.2% -18
20% 14.4% -293
30% 15.6% -567
40% 16.8% -842
Vary Project DurationAW(12%)=-10K (A/P12,5(1+X) )
+3K
X Duration AW
-40% 3 -1,163
-30%
-20% 4 -292
-10%
0 5 +226
10%
20% 6 +568
30%
40% 7 +809
Sensitivity Analysis
($1,500)
($1,000)
($500)
$0
$500
$1,000
$1,500
$2,000
-40% -30% -20% -10% 0% 10% 20% 30% 40%
% Change
AW
($)
MARR
Investment
Duration
Revenues
Sensitivity Less sensitive to MARR More sensitive to the other 3 parameters
Can do same type of analysis using PW/IRR, etc.
Varying more than one parameter Varying 2 parameters at a time results in a
3D graph See project 8
OMP Analysis Optimistic
Cash flows occur as well as can be reasonably expected
Most Likely Pessimistic
Cash flows occur as detrimentally as can be reasonably expected
OMP ExampleO M P
Investment -150K -150K -150K
Life 18 10 8
Market Value 0 0 0
Annual Revenues 110K 70K 50K
Annual Expenses -20K -43K -57K
AW +74,000 +4,650 -33,100
OMP AnalysisAnnual Expenses
O M P
Life Life Life
O M P O M P O M P
O 74K 68K 64K 51K 45K 41K 37K 31K 27K
M 34K 28K 24K 11K 5K 9K 3K 9K 13K
P 14K 8K 4K 9K 15K 19K 23K 29K 33K
Probabilistic Analysis (Monte Carlo) Use of probability for analysis of anything
which involves risk and uncertainty Must develop/assume probability
distributions Use random #’s to determine values
based on probabilities Make multiple runs (100x or 1000x) Summarize probabilities
Example using Probabilities
Useful Life Probability Random #
3 20% 00-19
5 40% 20-59
7 25% 60-84
10 15% 85-99
Next lecture