Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 29 views

    Project 2 Sample

    Uploaded by

    Yash Mittal
    The document discusses the financial analysis of a new project over multiple years. It covers revenue, costs, investment costs, repayment structure, cash flows, metrics like NPV, IRR, payback period. Scenarios for optimistic and pessimistic outlooks are also presented.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    Project 2 Sample

    Uploaded by

    Yash Mittal
    29 views14 pages
    The document discusses the financial analysis of a new project over multiple years. It covers revenue, costs, investment costs, repayment structure, cash flows, metrics like NPV, IRR, payback period. Scenarios for optimistic and pessimistic outlooks are also presented.

    Original Title

    Project 2 Sample (1).xlsx

    Copyright

    © © All Rights Reserved

    Available Formats

    XLSX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses the financial analysis of a new project over multiple years. It covers revenue, costs, investment costs, repayment structure, cash flows, metrics like NPV, IRR, payback period. Scenarios for optimistic and pessimistic outlooks are also presented.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    29 views14 pages

    Project 2 Sample

    Uploaded by

    Yash Mittal
    The document discusses the financial analysis of a new project over multiple years. It covers revenue, costs, investment costs, repayment structure, cash flows, metrics like NPV, IRR, payback period. Scenarios for optimistic and pessimistic outlooks are also presented.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 14

    Project 2

    Part 1 & 2 Percentage Amount (Year 1)


    Total Revenue(TR) 100% 900526

    Direct Costs:
    Food and Beverages 36.70% 330493
    Wages 30.20% 271959
    Total Direct Cost 66.90% 602452
    Gross Profit 33.100% 298074
    Indirect Cost:
    Rent 3.65% 32890
    Utilities 2.50% 22513
    Marketing 2.80% 25215
    Admin. (Manager Salary) 10% 87360
    Other Costs 1.50% 13508
    Total Indirect Cost 20.15% 181486
    Gross Operating Profit 12.95% $ 116,588

    Part 4
    Total Investment Cost (TIC) or I = FC + NWC

    Fixed Capital (FC):


    Fixed Invetment
    Rennovation and Design 188,500
    Kitchen Area 57,000
    Dinning Area 2,500
    POS harware and Software 5,000 253,000
    Pre production Capital Costs (From Appendix B) 13,174

    Total Fixed Capital 266,174

    Net Working Capital (From Part 3) (12,359)

    TIC or I = $ 253,815

    Part 5 Financial Structure

    TIC(I) 253,815
    r (return on investment) 9.80%
    L (Loan)
    ib (interest) 5.24%
    s (no. of Installments) 5

    Optimal repayment R=( I*r)/1+(s*ib) I*r 24,874


    (per installment) 1+(s*ib) 1.262

    R = 19,710

    Optimal amount of Loan L=R*s 98,549

    Optimal amount via Equity I-L = 155,266

    Optimal Equity Ratio 0.61 61.17%


    Optimal amount via equity I-debt amount = 98,549

    Optimal Debt Ratio 0.39 38.83%

    Part 6
    Revenue Expected to grow 2.70% per year
    Indirect cost expected to grow 1.90% per year
    Direct cost expected to grow 2.80% per year
    Corporate Tax 11% per year

    Transactions Year 1 Year 2 Year 3 Year 4


    Revenue 900,526 924,840 949,811 975,456
    - cost of operations 783,938 804255 825109 846516
    GOP 116,588 120,585 124,702 128,940
    - Depreciation n/a n/a n/a n/a
    NPBI 116,588 120,585 124,702 128,940
    - interest n/a n/a n/a n/a
    NPBT 116,588 120,585 124,702 128,940
    - Taxes (11%) 12,825 13,264 13,717 14,183
    NPAT 103,764 107,321 110,985 114,756

    Net Cash Flow(NCF)= GOP - Taxes - Changes in investment

    Year 1 Year 2 Year 3 Year 4


    NCF $ 103,764 $ 107,321 $ 110,985 $ 114,756

    Part 7
    Payback Preiod(PBP) = -(Initial investment) + cashflow = 0

    PBP = 0 -(253815)+103764+107321+42730 = 0

    PBP 2 years + 42730

    Part of 3rd Year (42730/110985)*12 4.60

    PBP 2 years and 4 months and 18 days

    Part 8

    t = 11%
    we = 38.83% 61%
    wd = 61.17% 39%

    kd = ib(1-t) 0.0524(1-0.11) 4.66%

    ks = id+(ßΓ) 0.0148+(0.66*0.02) 2.80%

    WACC 0.61*0.0280+0.39*0.0466 3.53%

    To find net present value(NPV)

    DCF of Year 1 DCF of Year 2 DCF of Year 3 DCF of Year 4


    2
    103764/(1+0.0353) 107321/(1+0.0353) 110985/(1+0.0353) 114756/(1+0.0353)4
    3

    110226 100127 100015 99887

    Present Value 510002

    NPV (PV-I) 510002-253815 $ 256,187

    Net Prevent Value is Positive because present value of all future cashflows in greater than the investment. So, it is a vaible project to

    Part 9
    With Positive NPV, we have identified that project is viable. But to know that to what extent this project is viable, we need to find Internal Rate
    IRR is the discount rate that equates the today's investment cost to the present value of all the future cash flows

    253815 = 103764/(1+IRR) + 107321/(1+IRR)2 + 110985/(1+IRR)3 + 114756/(1+IRR)4 + 118640/(1+IRR)5

    By Trial and Error

    Let IRR = 10% 94331 + 88695 + 83385 + 78380 + 73666

    Let IRR = 20% 86470 + 74528 + 64227 + 55341 + 47679

    Let IRR = 40% 74117 + 54756 + 40446 + 29872 + 22059

    Let IRR = 35% 76862 + 58887 + 45109 + 34549 + 26458

    Let IRR = 33% 78018 + 60671 + 47175 + 36675 + 28508

    Let IRR = 32% 78609 + 61594 + 48255 + 37799 + 29605

    From trial and error we have identified that IRR is somewhere between 32% and 33% (32% < IRR < 33%)
    As per question if we have to maintain 2% of range between L and U, We can say 32% < IRR < 34% or 31% < IRR < 33%.
    Part 10

    Given Two Scenarios: Optimistic Scenario Pessimistic scenario


    Change in Revenue 25% surge in price 25% drop in price
    Change in TVC 25% surge in price 25% drop in price Same as Revenue because TVC is directly proportional to Quantity
    Change in TFC Remains same Remains same

    Projected Year 1 Optimistic Scenario Pessimistic Scenario


    Total Reveue 900526 1125658 675395
    Total Variable Cost(TVC) 602452 753065 451839
    Total Fixed Cost(TFC) 181486 181486 181486
    Q(% of Capacity) 61% 49% 81%

    In optimistic scenario BEP % is 49% which means any production above 49% will be profit but in given project BEP% is 61% which is 12% less. So there is req
    quantity or price to increase the profit margin. On the other side, Pessimistic scenario has BEP % of 81%, so the profit margin is very
    With the higher BEP, the project is considered the more risky and high losses are expected as a result of any decline in the producti
    Part 3

    Number GAP Coverage Period Turnover Coefficient(TOC) Working Capital


    603352.42/121.67
    1 A/R 3 days 365/3 = 121.67 4,959
    270157.80/52
    2 Inventory of Raw Materials 7 days (1 week) 365/7 = 52 5,195
    270157.80/12
    3 A/P 30 days (1 month) 365/30 = 12 22,513

    Annual Cost of Operations (67% of Total Revenue) 603,352

    Annual Cost of Raw Material (30% of Total Revenue) 270,158

    New Working Capital 1+2-3 (From the table) $ (12,359)


    Year 5 Operation costs Year 1 Year 2 Year 3
    1,001,793 Total Direct Cost 602,452 619,321 636,662
    868490 (grow by 2.8%)
    133,303 Total Indirect Cost 181,486 184,934 188,448
    n/a (grow by 1.9%)
    133,303 Total Cost of Operations 783,938 804,255 825,109
    n/a
    133,303
    14,663
    118,640

    Year 5
    $ 118,640
    DCF of Year 5
    118640/(1+0.0353)5
    99747

    vestment. So, it is a vaible project to invest in.

    is viable, we need to find Internal Rate of Return(IRR)


    ure cash flows

    + 118640/(1+IRR)5

    = 418457 DCF is greater than I

    = 328245 DCF is greater than I

    = 221250 DCF is less than I

    = 241865 DCF is less than I

    = 251046 DCF is less than I

    = 255862 DCF is greater than I

    IRR < 33%)


    31% < IRR < 33%.
    directly proportional to Quantity

    Pessimistic Scenario
    675395
    451839
    181486
    81%

    61% which is 12% less. So there is requirement of increase in the


    % of 81%, so the profit margin is very less.
    a result of any decline in the productivity.
    Year 4 Year 5
    654,488 672,814

    192,028 195,677

    846,516 868,490

    You might also like