Financial Analysis :

In this marketing project Dentonic products are

re-launched and also a new product is added
Dentonic mouthwash. Mouthwash is a new
product hence there is a risk of failure, to
eliminate or reduce that risk up to significant
level, there is a need of suitable financial plan.
Mouthwash plant costs Rs.20 million, for that we
go for debt financing because it provides a tax
shield. So we go for bank borrowing at markup of
9.5%, following are the details of bank loan and
its schedule.

Financial Analysis :

Amount

2,000,000

Interest Rate

9.50%

Months

12

Loan Amortization Schedule:

Month
1
2
3
4
5
6
7
8
9
10
11
12
13

Start Balance
2,000,000.00
1,840,466.31
1,679,669.64
1,517,600.01
1,354,247.32
1,189,601.42
1,023,652.07
856,388.96
687,801.68
517,879.76
346,612.61
173,989.61
0

Principal

Interest

Payment

159,533.69
160,796.67
162,069.64
163,352.69
164,645.90
165,949.35
167,263.11
168,587.28
169,921.93
171,267.14
172,623.01
173,989.61
0

15,833.33
14,570.36
13,297.38
12,014.33
10,721.12
9,417.68
8,103.91
6,779.75
5,445.10
4,099.88
2,744.02
1,377.42
0

175,367.02
175,367.02
175,367.02
175,367.02
175,367.02
175,367.02
175,367.02
175,367.02
175,367.02
175,367.02
175,367.02
175,367.02
0

Comparative Analysis:
If Dentonic goes for equity financing to
purchase new mouthwash plant, they have to
pay 35% tax over investment and that will be
equal to Rs. 700,000. But if debt financing is
used, there will be only finance cost of 9.5%.
So debt financing provides us a buffer to
reduce the risk of loss and also provide tax
shield.

Pro-forma Cash flow Statement:

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Total

Receipts

Sales

60,000,000 66,000,000 72,600,000 79,860,000 87,846,000 96,630,600 106,293,660 116,923,026 128,615,329 141,476,861 155,624,548 171,187,002 1,283,057,026

Disbursements

Cost Of goods Sold

54,000,000 59,400,000 65,340,000 71,874,000 79,061,400 86,967,540 95,664,294 105,230,723 115,753,796 127,329,175 140,062,093 154,068,302 1,154,751,323

Salaries

6,900,000

6,900,000

6,900,000

6,900,000

6,900,000

6,900,000

6,900,000

6,900,000

6,900,000

6,900,000

6,900,000

6,900,000

82,800,000

Advertising Agency
(GroupM)

666,667

666,667

666,667

666,667

666,667

666,667

666,667

666,667

666,667

666,667

666,667

666,667

8,000,000

Administrative expenses

405,667

405,667

410,667

405,667

415,667

413,667

418,667

416,667

416,667

416,167

416,167

416,667

4,958,000

Loan Payments

175,367

175,367

175,367

175,367

175,367

175,367

175,367

175,367

175,367

175,367

175,367

175,367

2,104,404

Total Disbursement

Cash Flow

62,147,700 67,547,700 73,492,700 80,021,700 87,219,100 95,123,240 103,824,994 113,389,424 123,912,496 135,487,376 148,220,293 162,227,002

-2,147,700 -1,547,700

-892,700

-161,700

626,900

1,507,360

2,468,666

3,533,602

4,702,833

5,989,486

7,404,254

8,960,000

Estimation of Net Sales and Total cost:

Net Sales

Total Cost

60,000,000
66,000,000
72,600,000
79,860,000
87,846,000
96,630,600
106,293,660

Cost of goods
sold
54,000,000
59,400,000
65,340,000
71,874,000
79,061,400
86,967,540
95,664,294

6,000,000
6,600,000
7,260,000
7,986,000
8,784,600
9,663,060
10,629,366

8,147,700
8,147,700
8,152,700
8,147,700
8,157,700
8,155,700
8,160,700

Aug

116,923,026

105,230,723

11,692,303

8,158,700

Sep

128,615,329

115,753,796

12,861,533

8,158,700

Oct

141,476,861

127,329,175

14,147,686

8,158,200

Nov

155,624,548

140,062,093

15,562,455

8,158,200

Dec

171,187,002

154,068,302

17,118,700

8,158,700

Month

Sales

Jan
Feb
Mar
Apr
May
Jun
Jul

Breakeven Analysis:
18,000,000
16,000,000
14,000,000

12,000,000
10,000,000

Net Sales

8,000,000

Total Cost

6,000,000
4,000,000
2,000,000
0

10 11 12

Breakeven Analysis: