Financial Modeling in Excel

Project Evaluation Tutorial

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Project Evaluation Model for Design Y

(Unless otherwise specified, all financials are in USD Mn)

Units 0 Design Y

FY10A 1

FY11P 2

Asset Name Investment Assumptions Initial Investment Opportunity Cost Tenor of Investment Salvage Value of Asset P&L Assumptions Starting Revenue Growth in Revenues Variable Expenses/ Revenue Starting Fixed Expenses Growth in Fixed Expenses Tax Rate Working Capital Assumptions Starting working capital Working Capital as %age of Revenue Valuation Assumptions Discount rate to be taken as Risk free rate Beta Expected return by Investor Cost of debt Target debt: capital ratio Market Premium Expected return based on CAPM Calculations Cash Flow because of Capex in Design Y Initial Investment less: Opportunity Cost add: Starting working capital First Year Investment (net) Salvage Value of Asset P&L Statement for Design Y Revenues less: Variable Expenses less: Fixed Expenses EBITDA less: depreciation EBIT less: tax PAT Cash Flow Statement because of Investment in Design Y EBIT(1-t) add: depreciation less: increase in working capital less: Capex add: salvage value of asset

400 100 10 20 250 10% 40% 100 5% 30% 100 40% CAPM 4% 1.2 10% 7% 0.50 13% 15%

400 -100 100

100

110

250 100 100 50 40 10 3 7 7 40 0 0 0

275 110 105 60 40 20 6 14 14 40 -10 0 0

-400 0

Free Cash Flow for Project Valuation Expected return by Equity Investor Discount Factor (WACC) Discounted Cash Flow Net Present Value NPV (With formula) IRR

-400

47

44

FY12P 3

FY13P 4

FY14P 5

FY15P 6

FY16P 7

FY17P 8

FY18P 9

FY19P 10

121

133

146

161

177

195

214

236

303 121 110 71 40 31 9 22 22 40 -11 0 0

333 133 116 84 40 44 13 31 31 40 -12 0 0

366 146 122 98 40 58 17 41 41 40 -13 0 0

403 161 128 114 40 74 22 52 52 40 -15 0 0

443 177 134 132 40 92 28 64 64 40 -16 0 0

487 195 141 152 40 112 33 78 78 40 -18 0 0

536 214 148 174 40 134 40 94 94 40 -19 0 0

589 236 155 199 40 159 48 111 111 40 -21 0 20

51

59

67

77

88

100

114

150