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The document outlines the steps and calculations for conducting a financial feasibility analysis of a project, including determining revenue, costs, cash flows, depreciation, payback period, and other financial metrics like NPV and IRR to evaluate the project's profitability and ability to repay loans.

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Menna Mohamed
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10 views

Summary

The document outlines the steps and calculations for conducting a financial feasibility analysis of a project, including determining revenue, costs, cash flows, depreciation, payback period, and other financial metrics like NPV and IRR to evaluate the project's profitability and ability to repay loans.

Uploaded by

Menna Mohamed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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 Goal of financial feasibility analysis: ensure the ability through net cash flow (revenue vs. costs).

 Financial profitability: preference over another project.

Funding:
Loan = 17,000
Interest = 10%
Grace period = 2 years, start repaying from the third year “6800” which includes principal and interest.

Production:
Max capacity = 1.5 tone
1 tone = 5000
No. of cycles/year = 8
*First year capacity is 75% then increases to 100%

Revenue:
Selling price = 5000

Investment Cost:
Rental Fee = 2400
Foundation exp = 1000
Boiler = 2000
Silicon device = 2000
Concentration solution = 2000
Furniture = 2000
Tools = 1000
Working Capital = 4600 *repaid in the last year*

Age of the machine:


10 years

Employment and wages:


Project Manager = 400
2 technical workers = 250
2 non-technical workers = 250
Social insurance = 20%

Operating expense
9 tons of tomatoes = 300
180 Kg of salts = 0.50
Fuel and electricity = 200
Water Costs = 50
Transportation = 1200
Maintenance and spare parts = 500
Tax rate = 20%
Steps to solve:
First: life of the project
If it’s not mentioned in the question, determine it from the longest depreciation period.

Second: Annual revenue of the project

Production Age and Capacity Price per ton


Production X Price X No. of months X Capacity

Third: Investment Costs


Get the total investment you’ll use it later in the payback period

Forth: Labor cost and annual wages of the project

Item No. of workers Wage/Month Total/Month Annual Wages


*Get the total wages at the end and use it in the next step

Fifth: Annual operating cost

Item Cost Age and Capacity

Total operating expense


Total wages
Total operating cost

Sixth: calculate depreciation

Item Year Residual


*Divide each item minus the scarp value by the age of the project

Seventh: loan instalment

Year Beg Instalment Interest 10% Paid End


(Inst – Interest) (Beg – Paid)
Eighth: Cash flow table

Sales Revenue

-operating cost

-depreciation

Operating profit

-Interest

EBT

-Taxes

EAT

+depreciation

Operating cash flow

Ninth: payback period

Year CF ACF

Unrecovered cost
Payback = Years until recovery +
cash flow duringthe last year
Years until recovery---> Investment cost – cash flow until it reaches a positive number

Unrecovered----> Investment cost – previous cash flows

Tenth: Financial Profitability

Year CF PVIF PVCF ACF

Eleventh: IRR

Twelfth: Calculate NPV

Sum of PVCF – initial investment


Thirteen: Project profitability by using liquidity method

Net Cash flow = Total outflow – Total inflow

If it is positive then the project has surplus in liquidity and if negative then the project has a deficit. While zero
means that the project is in the breakeven phase.

Item 1 2 3 4 5
Inflow:
Revenue
Loans
Residual value
Working capital recovery

Outflow:
Investment Cost
Operating cost
Loan installment
Tax expense

Net cash flow


Cumulative CF

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