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					Financial Study
             1- Initial Investment
Items                     Price
Land                      1008000
Buildings& Construction   4272000
F.F&E                     1750000
Pre. Opening              611000
Vehicles                  1000000
Infrastructure
Working Capital 20%       448000
Contingency 10 %
Feasibility study
Total                     9,509,200
            The capital
Partner A        1836400
Partner A        1836400
Partner A        1836400
Bank Loan        4000000
Total            9,509,200
                          Insurance

Items         Insurance Percentage    Insurance
Building      3%                      98160
F.F&E         3%                      52500
Vehicles      3%                      30000
              Total                   180660
                      Depreciation

Building (30 Years)      109067
F.F&E (7 years)          250000
Vehicles (10 Years0      100000
Total                    459067
                        Interest
    Year      Loan   Amortization     Unpaid      Interest       Total
                                      Balance                 Installment

0          4000000

1                    800000         4000000     5600000      1360000

2                    800000         3200000     448000       1248000

3                    800000         2400000     336000       1136000

4                    800000         1600000     224000       1024000

5                    800000         800000      102000       912000

                     4000000                    1680000      5680000
     Net Cash Flow (Year Zero)
Cash In   Amount   Cash Out          Amount

                   Land              1008000
                   Buildings         4272000
                   F.F&E             1750000
                   Pre Opening       611000
                   Landscape         420000
                   Working Capital   448000
                   Vehicles          1000000
                   Total             9509200
                Net Cash Flow (Year 2)

Cash In     Amount     Cash Out                   Amount
Rest        1800000    F&B
                                                  1821600
Coffee sh   6000000    Salaries& Staff expenses
                                                  3000000
IRD         1944000    Contracts
                                                  140000
Banq        788400     Marketing
                                                  500000
Catering    100000     Insurance
                                                  180660
                       Utilities
                                                  157000
                       Depreciation
                                                  459067
                       Loan Installment
                                                  1360000
Total       10632400   Total
                                                  7608327
            Net cash   3024073
   ROE
   3024073 / 5509200 x100 = 54%
   Profit Margin
   3024073 / 10632400 x 100 = 28 %
   ROI
   3024073 / 9509200 x 100 = 31 %
            Net Cash Flow (Year 3)
Cash In       Amount   Cash Out                   Amount
Rest                   F&B

Coffee sh              Salaries& Staff expenses

IRD                    Contracts

Banq                   Marketing

Catering               Insurance

                       Utilities

                       Depreciation

                       Loan Installment

Total                  Total
            Net Cash Flow (Year 4)
Cash In       Amount   Cash Out                   Amount
Rest                   F&B

Coffee sh              Salaries& Staff expenses

IRD                    Contracts

Banq                   Marketing

Catering               Insurance

                       Utilities

                       Depreciation

                       Loan Installment

Total                  Total
            Net Cash Flow (Year 5)
Cash In       Amount   Cash Out                   Amount
Rest                   F&B

Coffee sh              Salaries& Staff expenses

IRD                    Contracts

Banq                   Marketing

Catering               Insurance

                       Utilities

                       Depreciation

                       Loan Installment

Total                  Total
            Net Cash Flow (Year 6)
Cash In       Amount   Cash Out                   Amount
Rest                   F&B

Coffee sh              Salaries& Staff expenses

IRD                    Contracts

Banq                   Marketing

Catering               Insurance

                       Utilities

                       Depreciation

                       Loan Installment

Total                  Total
            Net Cash Flow (Year 7)
Cash In       Amount   Cash Out                   Amount
Rest                   F&B

Coffee sh              Salaries& Staff expenses

IRD                    Contracts

Banq                   Marketing

Catering               Insurance

                       Utilities

                       Depreciation

                       Loan Installment

Total                  Total
            Net Cash Flow (Year 8)
Cash In       Amount   Cash Out                   Amount
Rest                   F&B

Coffee sh              Salaries& Staff expenses

IRD                    Contracts

Banq                   Marketing

Catering               Insurance

                       Utilities

                       Depreciation

                       Loan Installment

Total                  Total
            Net Cash Flow (Year 9)
Cash In       Amount   Cash Out                   Amount
Rest                   F&B

Coffee sh              Salaries& Staff expenses

IRD                    Contracts

Banq                   Marketing

Catering               Insurance

                       Utilities

                       Depreciation

                       Loan Installment

Total                  Total
            Net Cash Flow (Year 10)
Cash In       Amount   Cash Out                   Amount
Rest                   F&B

Coffee sh              Salaries& Staff expenses

IRD                    Contracts

Banq                   Marketing

Catering               Insurance

                       Utilities

                       Depreciation

                       Loan Installment

Total                  Total
               For Each Year
   R.O.E (Return On Equity ) =
   Net Profit / equity x 100
   Profit Margin =
   Net Profit / Total revenue x 100
   ROI (Return on investment)
   Net Profit / Total Investment x 100
              Net Cash Flow
Years   Cash In    Cash Out   Net Cash Flow
0                  9509200    9509200

1       10632400   7608327
                              3024073
2       10853048   8001101

3       11293770   8415832

4       11752781   9299848

5       12114681   9749333

6       12249005   9114183

7       12506869   9754389

8       13017773   10623694

9       13421947   11595790

10      14103763   12453055
        Pay Back Period
Years     Net revenue   Accumulated

0         9509200       (9509200)
1         3024073       (6485127)
2         2851947       (3633179)
3         2877938       (755242)
4         2452933       1697691
                  Balance Sheet
Assets                  Liabilities
Fixed Asset:-
Land
                        Bank Loan
Building                O.E
F.F&E
Landscape

Current Assets
Working Capital
Contingency
Inventory
Pre Opening



Total 9509200           9509200
       Net Present Value (NPV)
Year     Net Cash F   D.F 10 %   NPV
0        (9509200)               (9509200)
1        3024073      0.909      2748882
2                     0.826
3                     0.751
4                     0.683
5                     0.621
6                     0.564
7                     0.513
8                     0.467
9                     0.424
10    0.486
NPV           28880900
       Internal Rate return (IRR)
Year      Net Cash F   D.F 14 %   NPV
0         (9509200)               (9509200)
1                      0.8772
2                      0.7695
3                      0.6750
4                      0.5921
5                      0.5194
6                      0.4556
7                      0.3996
8                      0.3506
9                      0.3075
10    0.2697
IRR            18114080
Year   Net Cash F   D.F 14.5 %   NPV
0      (9509200)                 (9509200)
1                   0.8734
2                   0.7628
3                   0.6662
4                   0.5819
5                   0.5083
6                   0.4439
7                   0.3877
8                   0.3387
9                   0.2959
10                  0.2584
                                 (488352156)
             Summary
Item              value

ROE               44 %

ROI               26 %

PAY BACK PERIOD   4 years

NPV               Positive

IRR               20 %
         Over View on the Finance
   Discount Factors For End-Of-Year Payment
   When to Use End-of-Year Discount Factors. Use end-of-year discount
    factors when payments are due at the end of the year or the beginning of
    the year. Remember, that a payment due at the beginning of Year 3 is the
    same as a payment due at the end of Year 2.
   End-of-Year Discount Factor Calculation. The discount factor formula for
    each end-of-year cash flow (payment/ receipt) is written:
   Where:
   DF = End-of-year discount factor
   i = Discount rate
   t = Number of years until the payment (receipt is due)
   For Example: Determine the present value (PV) of a payment of $1,000
    due at the end of 1 year using the nominal discount rate for three years or
    less, 5.6 percent.
   Discount Factor Calculation:
   Present Value Calculation:
   Sum Factors for Repetitive End-of-Year Cash Flows. When
    there is a repetitive cash flow such as a lease payment, you can
    use a sum factor to speed the calculation process.
   Where:
   PV = Present value
   SF = End-of-year sum factor
   CF = Cash flow
   For example: Determine the present value of a series of three
    payments of $1,000 each due at the end of each of the next
    three years, when the discount rate is 5.6 percent.
The internal rate of return is simply the rate of return on an investment. IRR is similar to the net
    present value calculation. The NPV calculation finds the net present value using a predefined
    discount rate. IRR finds the discount rate that makes the NPV equal to zero. The discount rate
    is the cost of borrowing or using money for investments. The decision to accept or reject the
    purchase depends on the whether the internal rate of return is higher than the discount rate.
    The decision criteria for these projects is simple, accept the project if the IRR is higher than
    the discount rate or the cost of borrowing. There are also financing decisions, where there are
    cash inflows followed by cash outflows. For example, magazine publishers recieve
    subscription payments in the beginning and then incur delivery costs later. In the case of
    financing projects the decision criteria is opposite to that of the investing projects, accept the
    financing project if the IRR is less than the discount rate or cost of borrowing. In the
    magazine example accept the project if it is cheaper to finance or borrow the money from the
    subscribers than the bank.




This example involves the decision to purchase a new machine to replace an old one. JonesCo
    needs to purchase a new machine and has a choice of two machines that will provide the same
    function. Machine A cost $100,000 and would provide savings of $25,000 for the next five
    years. Machine B cost $75,000 and would provide savings of $20,000 for the next 5 years.
    The company's discount rate is 10%.
Machine
     A                             Time



                 0        1        2          3        4        5


                  -
                $1
    Cash        00,
     flo        00    $25,00   $25,00     $25,00   $25,00   $25,00
      ws         0         0        0          0        0        0




Machine
     B                             Time



                 0        1        2          3        4        5

    Cash
     flo              $20,00   $20,00     $20,00   $20,00   $20,00
      ws   -$75,000        0        0          0        0        0
Machine A costs more than machine B but also provides higher savings than machine B in the future. Both
   machines have total savings of $25,000 over the cost of the machine. IRR analysis can be used to find out
   which machine will provide the highest return on investment.




Machine A                       Machine B
                                        10.42
        7.930                               4
            8                               8
IRR         %                   IRR         %




The IRR for machine A is less than the discount rate of 10%, in other words it cost more to borrow the money
    than the machine will return. In contrast machine B has an IRR of 10.42%, this means that the machine
    will return more than the cost of borrowing the money and is therefore a good investment.

				
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posted:8/26/2011
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