Financial Modeling Certification

Project Finance Model

Step - 7 : Decision Making

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Financial Model
Directions and Assumptions

1 Please add appropriate formulae in the cells filled with the following color <===

2
The project is divided into 2 stages - Development and Life of project. Development stage of the
project is completely built out in the model. Please do not disturb other formulae in the model.
Only work in cells with fill color shown in step - 1

3 Assumptions are shown in Red. Price and Quantity estimates are provided to complete the
income statement.

4 Selling and Administrative expense are 25% of revenues for that period

5 Depreciation is to be calculated using Straight line method. Life of the equipment is 4 years and
its salvage value is 0.

6 Tax is 30% of Earnings before tax for that period

7 Working capital requirement is 10% of revenues for that period

8 Interest Expense is to be computed based on Beginning of Period Debt

9 Interest Income is to be computed based on Beginning of Period Cash

10 WACC for the project is 10%

11 Complete the Income Statement only for the life of the project

12 Complete the Balance Sheet and Cash Flow Statement for all the 7 years.

Questions

Q Should Mr.Sharma invest in the project?

✘ Yes

No

Q Give reason for your advice

Financial Model
(Assumptions in Red, Calculations in Black)

Development Phase
Years 0 1

Development Stage

Total Project Cost for Period 656,513

Fixed Assets, Gross 656,513
Hard Cost 2500000 625,000
Phasing 25%

Funding Mix
Equity 40% 262,605
Debt 60% 393,908

Equity Capital 262,605

Capitalised Interest
Capitalised Interest (Soft Cost) 8% 31,512.61

Debt Schedule
Opening Debt -
Additions / Repayment 393,908
Closing Debt 393,908

Assumptions
Current Case Base
Initial Sales Volume (Units) 100000
Initial Sales Price Per Unit 125
Initial Cost Price Per Unit 75
Growth in Sales Volume 15%
Growth in Sales Price Per Unit 20%
Growth in Cost Per Unit 20%

Income Statement

Sales
Cost of Goods Sold
Selling & Administration Costs 25%
EBITDA
 Depreciation
EBIT
Interest, Net
EBT
Tax 30%
PAT/NI

Balance Sheet

Liabilities
Debt 393,908
Equity Capital 262,605
Retained Earnings -
Total Liabilities 656,513

Assets
Fixed Assets, Gross 656,513
Accumulated Depreciation 4 -
Net Fixed Assets 656,513
Cash -
Working Capital 10% -
Total Assets 656,513
Checksum -

Cash Flow Statement

Net Income -
Depreciation -
Change in W/C -
Net CFO -

Capex (656,513)
Net ICF (656,513)

New Equity 262,605

Debt Raised/Repaid 393,908
Net FCF 656,513

Net Change in Cash -

BOP Cash -
EOP Cash -

Interest, Net
Interest Expense 8%
Interest Income 5%
Interest, Net

Computation of Free Cash Flow

Cash Flow Before Financing (CFO + CFI + Debt Raised - Debt Repaid) (262,605)

Returns Analysis

Net Present Value 15% 1,202,810 Positive

Internal Rate of Return 43.01% >15%
 COD
evelopment Phase Project Life 4 Years
2 3 4 5 6 7

1,346,127 757,486
2,002,639 2,760,125 2,760,125 2,760,125 2,760,125 2,760,125
1,250,000 625,000
50% 25%

538,451 302,994
807,676 454,492

801,056 1,104,050 1,104,050 1,104,050 1,104,050 1,104,050

96,126.69 132,486.01 132,486.01 132,486.01 88,324.01 44,162.00

393,908 1,201,584 1,656,075 1,656,075 1,104,050 552,025

807,676 454,492 - (552,025) (552,025) (552,025)
1,201,584 1,656,075 1,656,075 1,104,050 552,025 -

100,000 115,000 132,250 152,088

125 150 180 216
75 90 108 130

12,500,000 17,250,000 23,805,000 32,850,900

7,500,000 10,350,000 14,283,000 19,710,540
3,125,000 4,312,500 5,951,250 8,212,725
1,875,000 2,587,500 3,570,750 4,927,635
 690,031 690,031 690,031 690,031
1,184,969 1,897,469 2,880,719 4,237,604
132,486 123,648 34,251 (83,662)
1,052,483 1,773,821 2,846,467 4,321,266
315,744.80 532,146.34 853,940.15 1,296,379.75
736,738 1,241,675 1,992,527 3,024,886

1,201,584 1,656,075 1,656,075 1,104,050 552,025 -

801,056 1,104,050 1,104,050 1,104,050 1,104,050 1,104,050
- - 736,738 1,978,413 3,970,940 6,995,826
2,002,639 2,760,125 3,496,863 4,186,513 5,627,015 8,099,876

2,002,639 2,760,125 2,760,125 2,760,125 2,760,125 2,760,125

- - 690,031 1,380,063 2,070,094 2,760,125
2,002,639 2,760,125 2,070,094 1,380,063 690,031 -
- - 176,769 1,081,450 2,556,484 4,814,786
- - 1,250,000 1,725,000 2,380,500 3,285,090
2,002,639 2,760,125 3,496,863 4,186,513 5,627,015 8,099,876
- - - - - -

- - 736,738 1,241,675 1,992,527 3,024,886

- - 690,031 690,031 690,031 690,031
- - (1,250,000) (475,000) (655,500) (904,590)
- - 176,769 1,456,706 2,027,058 2,810,327

(1,346,127) (757,486) - - - -
(1,346,127) (757,486) - - - -

538,451 302,994 - - - -
807,676 454,492 - (552,025) (552,025) (552,025)
1,346,127 757,486 - (552,025) (552,025) (552,025)

- - 176,769 904,681 1,475,033 2,258,302

- - - 176,769 1,081,450 2,556,484

- - 176,769 1,081,450 2,556,484 4,814,786
 132,486.01 132,486.01 88,324.01 44,162.00
- 8,838.46 54,072.51 127,824.18
132,486 123,648 34,251 (83,662)

(538,451) (302,994) 176,769 904,681 1,475,033 2,258,302

Sales Price per units Vs Growth In Sales Volme

43.01% 115 120 125 130 135
10.0%
12.5%
15.0%
17.5%
20.0%
 8%
3
642612.67
opening intrest emi emi closing
1656075 132486 642612.7 510126.7 1145948
1145948.33 91675.8664 642612.7 550936.8 595011.5
595011.526 47600.9221 642612.7 595011.7 -0.221488
Opening RETAINED EARNINGS
Plus: PAT
Minus: Dividend Paid

Closing RETAINED EARNINGS