1. Le Grandior Investment Group
Investment Proposal Title: Expansion of CNG Fleet-
Lower carbon monoxide emission than conventional trucks
3 September 2016

2. Team Members
• Dawirna Wijaya
• Julieanna Md. Noor
• Jess Soh
• Randy Zhang
• Maizar S/O Abdul Kalil
• Mohammed Faizal Bin Hassan
• Norfarhan Bin Noeryamin
• Lawrence Koh

3. Conventional Truck Vs Eco-Friendly Truck
Vs

4. Video – CNG Vehicle
• http://www.dbschenker.com.sg/log-sg-
en/product_services/eco_solutions/dbSchenkerAdvantage.html

5. Contents
• Objective
• Net Present Value (NPV)
• Internal Rate of Return (IRR)
• Payback period
• Accounting Rate of Return (ARR)
• Conclusion

6. Objective - Expansion of Fleet
• Based on annual travel of 70,000 km, each new Iveco Daily 35S14G EEV
truck is expected to reduce annually 3.2 tonnes of CO2 or 20% CO2
reduction compared to a similar truck fueled with diesel.
• “As a global transport and logistics provider we are aware of our
responsibility towards the environment. Therefore, we rely on one of the
most eco-friendly fuels on the market: compressed natural gas”, said Mr.
Albin Budinsky, CEO DB Schenker Logistics in Germany. The strategy of
the DB Schenker group is to reduce its specific CO2 emissions until 2020 by
20 percent.

7. COMMITMENT SET
BY 2020
• To lead the freight
industry into a greener
pathway.
• DB Schenker sets
responsible benchmark
to keep all employee,
shareholder, client
reminder of the
importance of going
GREEN.
• In-order to achieve GO
GREEN policy, we have
break down into 4
objective ( Green
Network, Green Road,
Green Terminal & Green
Rail. )

8. Net Present Value (NPV)
• The NPV method computes the expected net monetary gain or loss from a
project by discounting all expected cash flows to the present point in time,
using the required rate of return.
• Only projects with a zero or positive net present value are acceptable.

9. The NPV Formula

10. Calculating Net-Present Value (NPV)
1
(1 + r)
n
interest
year
CF x DF
Net initial
investment
$379 100
Useful life 5 years
Recurring cash
flows
$100 000
Required rate of
return
8%
Total present
value
Present value
of $1
discounted at
8%
Cash flows at
end of year
(Year 0)
Cash flows at
end of year
(Year 1)
Cash flows
at end of
year (Year
2)
Cash flows at
end of year
(Year 3)
Cash flows
at end of
year (Year
4)
Cash flows at
end of year
(Year 5)
Net initial
investment
$379 100 1.000 $379 100
$92 600 0.926 $100 000
$85 700 0.857 $100 000
$79 400 0.974 $100 000
$73 500 0.735 $100 000
$68 100 0.681 $100 000
Net present
value
$20 200
Recurring
cash
flows

11. Evaluation
Projects with a positive net present quality are worthy, in light of the fact that
the return from these activities surpass the expense of capital (the return
available by investing the capital somewhere else).
From the net present-value calculated, our project will be profitable!

12. Drawbacks of using NPV:
• Requires to make projections, therefore not 100% accurate.
Advantages of NPV:
• Able to determine whether the project will increase your firm's value. The NPV
calculation reveals the dollar amount that the project will produce.
• Considers when the project will earn income. For example, some projects may not have a
positive cash flow until the third year. Some projects will start contributing to profits in the first
year
• The present value of a project is expressed in a dollar amount. Some business managers would
rather see a percentage or rate of return.
• It can be used in situations where the required rate of return varies over the life of the project.

13. Internal Rate of Return (IRR)
• Purpose / Function : Is the interest rate at which the net present value of all the cash flows (both
positive and negative) from a project or investment equal zero. Internal rate of return is used to evaluate
the attractiveness of a project or investment.
• Pros : 1) Simplicity.
2) Time value of money.
• Cons : 1) Does not measure company size.
2) Conflicting answers when compared to NPV.
Note : Must be used with other methods.

14. Company Internal Rate of Return (IRR)
Capital Investment $379,100.00
Recurring Cash Flow $100,000.00
Period of Years 5 Years
Trial and Error
IRR 5% 10% 8%
Timeline
Period
Year 0 -$379,100.00 -$379,100.00 -$379,100.00
Year 1 $100,000.00 $100,000.00 $100,000.00
Year 2 $100,000.00 $100,000.00 $100,000.00
Year 3 $100,000.00 $100,000.00 $100,000.00
Year 4 $100,000.00 $100,000.00 $100,000.00
Year 5 $100,000.00 $100,000.00 $100,000.00
Total Present
Value $432,947.67 $379,078.68 $399,271.00
Net Present Value $53,847.67 -$21.32 $20,171.00
Working Calculation
5% 10% 8%
( 1 + IRR) ^ Periodic Year ( 1 + IRR) ^ Periodic Year
( 1 + IRR) ^ Periodic
Year
1.05 $95,238.10 1.1 $90,909.09 1.08 $92,592.59
1.1025 $90,702.95 1.21 $82,644.63 1.1664 $85,733.88
1.157625 $86,383.76 1.331 $75,131.48 1.259712 $79,383.22
1.21550625 $82,270.25 1.4641 $68,301.35
1.360488
96 $73,502.99
1.27628156
3 $78,352.62 1.61051 $62,092.13
1.469328
077 $68,058.32
** Present Value = Flow Value / ( 1 + IRR) ^ Periodic Year

15. DB Schenker Payback Period
5 Years Basis
• DB Schenker invested $379,100 in
more efficient Carbon reduce trucks.
• The cash savings from the new
equipment is expected to be $100,000
per year for 5 years. The payback
period is 5 years ($$379,100
divided by $100,00 per year).
Formula

17. Advantages and Disadvantages
Advantages of payback period
• Payback period is very simple to calculate.
• It can be a measure of risk inherent in a project.
Since cash flows that occur later in a project's life
are considered more uncertain, payback period
provides an indication of how certain the project
cash inflows are.
• For companies facing liquidity problems, it
provides a good ranking of projects that would
return money early.
Disadvantages of payback period
• Payback period does not take into account
the time value of value which is a serious
drawback since it can lead to wrong
decisions. A variation of payback method
that attempts to remove this drawback is
called discounted payback period method.
• It does not take into account, the cash
flows that occur after the payback period.

18. Sketch of Relevant Cash Flows at End of Year
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
($372,890)
($6,210)
($379,100)
$100,000 $100,000 $100,000 $100,000 $93,790
$0
$6,210
($379,100) $100,000 $100,000 $100,000 $100,000 $100,000
Straight-line Depreciation
Terminal Disposal Value
Recovery of Working Capital
Total Relevant Cash Flows
Initial Euro Truck Investment
Initial Working Capital
Investment
Net Initial Investment
Recurring Operating Cash Flows

19. EURO TRUCK – ACCOUNTING RATE OF RETURN
• Non-cash flow method to evaluate an
investment.
• An accounting measure of income divided by an accounting measure of investment.
• Also known as Return on Investment.
Accounting Rate of Return (ARR) =
Increase in expected Average Annual Operating Profit
Net Initial Investment

20. ARR Breakdown
Average Operating Profit – Straight Line Depreciation of the Euro Trucks

21. CalculatingAverage Operating Profit:
Year1 Year 2 Year 3 Year 4 Year 5
=
(100,000 x 4) + 93,790
5
= $98,758
Straight Line Depreciation = Initial Investment divide by the period.
= 372,890 ÷ 5
= $74,578

22. Accounting Rate of Return =
Average Operating Profit – Straight Line Depreciation of the Euro Trucks
Net Initial Investment

23. Therefore…
Accounting Rate of Return (ARR) =
$24,180
$379,100
= 0.06378
Convert to percentage
= 6.4%

24. Evaluation:
• The Required Rate of Return is set at 8%.
• Based on ARR, the investment would receive 6.4% of returns, because the return is lower than
the RRR of 8%, the investment should be rejected.

25. Drawbacks of using ARR:
• ARR method does not take into account cash flow from the investment,
this method only focuses on accounting net operating income.
• ARR method does not take into account the time value of money. Under
this method a dollar in hand and a dollar to be received in the future are
considered of equal value.
Advantages of ARR:
• It looks at the profitability of the project, which is the key issue for investors
• or shareholders.
• Simple and straightforward method that provides percentage return,
which can be compared with the target return.

26. Conclusion
Type of Investment
Techniques
Yes No Remarks
Net Present Value
(NPV)
✓✓ From the calculations, a positive NPV
was derived, therefore this is a project
worth investing in.
Accounting Rate of
Return (ARR)
✓✓ As the ARR acquired was 6.4% which
was lower than the RRR of 8%, it is not
feasible to invest in this project.
Payback Period ✓✓ The payback period calculated is 3.3
years which is lesser than the project
period, therefore this is a project worth
investing in.
Internal Rate of Return
(IRR)
✓✓ It has been derived from calculations,
that through IRR this project is feasible.
The RRR set was 8% and the IRR
calculated was 10%.

27. Thank you!