Answer?

Click to see additional instructions Proceed to compute the Accounting Rate of Return (ARR) for Floxin project of Modern Pharma Ltd in this question and provide as an input below. X-CI is provided for comparison only Floxin Accounting Rate of Return Eg, input as 00.00 K-CIN % 33.75 % Floxin K-O'N Accounting Rate of Return Eg.. input as 00.00 % 33.75 % for reference, purpose, the details of Floxin is provided again from the base question Use this information for answering the questions 15:21 Sum total of all these 7 sub-questions carries 20 marks . Modern Pharma is considering the manufacture of a new drug, Floxin, for which the following information has been gathered Roxin is expected to have a product de cycle of seven years and after that it would be withdrawn from the market. The sales from this drug are expected to be as follows Floxin Year 1 2 3 4 Sales Rs in million 5 00 120 160 200 160 120 The capital equipment required for manufacturing Foxin is 120 million and it will be depreciated at the rate of 25 percent per year as per the WOV method for tax purposes. The expected net salvage value after seven years is? 25 million The working capital equirement for the project is expected to be 25 percent of sales Working capital level is adjusted at the beginning of the year in relation to the projected sales for the year. At the end of 7 years, working capital is expected to be liquidated at par, barring an estimated loss of 4 million on account of bad debt which, of course, will be a tax deductible expense The capital equipment required for manufacturing Floxin is ? 120 million and it will be depreciated at the rate of 25 porcenter year as per the WDV method for tax purposes. The expected net salvage value after seven years is? 25 million The working capital requirement for the project is expected to be 25 percent of sales. Working capital level is adjusted at the beginning of the year in relation to the projected sales for the year. At the end of 7 years, working capital is expected to be liquidated at par, barring an estimated loss of ? 4 million on account of bad debt which, of course, will be a tax-deductible expense. The accountant of the firm has provided the following estimates for the cost of Floxin Raw material cost: 30% of sales Variable manufacturing cost: 10% of sales Fixed annual operating and maintenance costs: ? 10 million Variable selling expenses: 10% of sales Overhead allocation excluding depreciation, maintenance, and interest: 10% of sales. The incremental overhead attributable to the overhead are, however, expected to be only 5 percent of sales The manufacture of Floxin will cut into the sales of an existing product thereby reducing its contribution margin by ? 10 million per year The tax rate for the firm is 30 percent. The discount rate applicable for Modern Pharma is 15.00% p.a. An additional information is provided to you regarding another independent project of Modem Pharma, by name K-CIN The PAT, NCF and output of appraisal techniques are provided for comparison with Floxin But remember, K-CN is an independent project, not meant to compete with Floxin project. So, you may consider Floxin as an independent Mon Dec 28 2020 R26:03 AM The manufacture of Floxin will cut into the sales of an existing product thereby reducing its contribution margin by 10 million per year. The tax rate for the firm is 30 percent The discount rate applicable for Modern Pharma is 15.00% p.a. An additional information is provided to you regarding another independent project of Modem Pharma by name K CIN. The PAT, NCF and output of appraisal techniques are provided for comparison with Floxin. But remember, K-CIN is an independent project not meant to compete with Floxin project So, you may consider Floxin as an independent project and make investment decision. However, use X-CIN information to just give additional insights. K CIN Year 0 Profit Alter Tax Rs. In million 2 3 S Net Cash Flow Rs. In million 3 21.7 39.5 26.7 10.3 - 120 18 30.5 63.6 47,2 58.2. us Click to see additional instructions Proceed to compute the Accounting Rate of Return (ARR) for Floxin project of Modern Pharma Ltd in this question and provide as an input below. X-CI is provided for comparison only Floxin Accounting Rate of Return Eg, input as 00.00 K-CIN % 33.75 % Floxin K-O'N Accounting Rate of Return Eg.. input as 00.00 % 33.75 % for reference, purpose, the details of Floxin is provided again from the base question Use this information for answering the questions 15:21 Sum total of all these 7 sub-questions carries 20 marks . Modern Pharma is considering the manufacture of a new drug, Floxin, for which the following information has been gathered Roxin is expected to have a product de cycle of seven years and after that it would be withdrawn from the market. The sales from this drug are expected to be as follows Floxin Year 1 2 3 4 Sales Rs in million 5 00 120 160 200 160 120 The capital equipment required for manufacturing Foxin is 120 million and it will be depreciated at the rate of 25 percent per year as per the WOV method for tax purposes. The expected net salvage value after seven years is? 25 million The working capital equirement for the project is expected to be 25 percent of sales Working capital level is adjusted at the beginning of the year in relation to the projected sales for the year. At the end of 7 years, working capital is expected to be liquidated at par, barring an estimated loss of 4 million on account of bad debt which, of course, will be a tax deductible expense The capital equipment required for manufacturing Floxin is ? 120 million and it will be depreciated at the rate of 25 porcenter year as per the WDV method for tax purposes. The expected net salvage value after seven years is? 25 million The working capital requirement for the project is expected to be 25 percent of sales. Working capital level is adjusted at the beginning of the year in relation to the projected sales for the year. At the end of 7 years, working capital is expected to be liquidated at par, barring an estimated loss of ? 4 million on account of bad debt which, of course, will be a tax-deductible expense. The accountant of the firm has provided the following estimates for the cost of Floxin Raw material cost: 30% of sales Variable manufacturing cost: 10% of sales Fixed annual operating and maintenance costs: ? 10 million Variable selling expenses: 10% of sales Overhead allocation excluding depreciation, maintenance, and interest: 10% of sales. The incremental overhead attributable to the overhead are, however, expected to be only 5 percent of sales The manufacture of Floxin will cut into the sales of an existing product thereby reducing its contribution margin by ? 10 million per year The tax rate for the firm is 30 percent. The discount rate applicable for Modern Pharma is 15.00% p.a. An additional information is provided to you regarding another independent project of Modem Pharma, by name K-CIN The PAT, NCF and output of appraisal techniques are provided for comparison with Floxin But remember, K-CN is an independent project, not meant to compete with Floxin project. So, you may consider Floxin as an independent Mon Dec 28 2020 R26:03 AM The manufacture of Floxin will cut into the sales of an existing product thereby reducing its contribution margin by 10 million per year. The tax rate for the firm is 30 percent The discount rate applicable for Modern Pharma is 15.00% p.a. An additional information is provided to you regarding another independent project of Modem Pharma by name K CIN. The PAT, NCF and output of appraisal techniques are provided for comparison with Floxin. But remember, K-CIN is an independent project not meant to compete with Floxin project So, you may consider Floxin as an independent project and make investment decision. However, use X-CIN information to just give additional insights. K CIN Year 0 Profit Alter Tax Rs. In million 2 3 S Net Cash Flow Rs. In million 3 21.7 39.5 26.7 10.3 - 120 18 30.5 63.6 47,2 58.2. us