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Emmanuel Jon Llego

on 20 September 2013

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Project Statement of Comprehensive Income
Internal Rate of Return
Investment Costs
Defined as the sum of fixed capital (fixed investments plus pre-production capital costs) and net working capital, with fixed capital constituting the resources required for constructing and equipping an investment project, and working capital corresponding to the resources needed to operate the project totally or partially
Certain expenditures are incurred during the various stages of the project formulation and implementation and prior to commercial production. These expenditures which have to be capitalized include:
Indicates the financial means required to operate the project according to its production program.
It is defined as current assets minus current liabilities.

comprise receivables, inventories (raw material, auxiliary material, supplies, packaging material, spares and small tools), work-in-progress and finished products and cash

consist mainly of accounts payable (creditor) and are free of interest.
A feasibility study should only be made if financing prospect to the extent indicated by such studies can be defined fairly clearly.
B. Projected Statement of Financial Position
Based on the sales forecast, the amounts of assets necessary to support this sales level are determined. Certain assets particularly the current assets ( cash, receivables, inventory) as well as trade accounts payable and accruals will spontaneously increase with increased sales.

If the sales growth rate is rapid some external capital will be required to support the growth in sales. The statement of financial position will therefore project both the resources required as well as the sources of financing that will be availed of to meet the needs of the enterprise.
Break-Even Analysis
Net Present Value
Internal Rate of Return (IRR)
Break-Even Time or Discounted Payback Period
Simple or Accounting Rate of Return (ARR)
Land and Site Preparation
Buildings and Civil Works
Plant, Machinery and Equipment
Industrial Property Rights
Fixed Investments
Pre-operating expenditures
Networking Capital
a) Preliminary and capital issue expenditure
> Registration and formulation of the company including legal fees, capital issue expenditures, preparation of perpectus, underwriting commissions, brokerages, etc.)
b) Expenditures for preparatory studies
> Consultant fees for preparing the studies and other expenses for planning the project
c) Pre-production expenditure
> salaries, travel expense, training costs incurred during the pre-production period.
d) Trial runs, start-up and commissioning expenditures
To evaluate the economic viability of the project (i.e., profitability) and its financial requirements, the following statements may be prepared:
1. Project Statement of Comprehensive Income
2. Project Statement of Financial Position
3. Project Cash Flow Statement
It begins with the forecast of sales. The sales projections are based on the results of the study of the economic aspect .
Then the statements of comprehensive income from the start-up period to the point where the project is fully operational will be prepared to estimate the net income or loss the company will generate.
a.) operating cost ratio
(i.e., cost of sales, selling and administrative expenses to sales),
b.) tax rate
c.) interest charges
d.) dividend payout
This requires assumption about the
C. Projected Cash Flow
It is not sufficient only to find sources of finance; the timing of inflow of funds (from financial resources and sales revenue) must also be synchronized with the outflow of investment expenditures, production costs and other expenditures. If this is not done, significant losses of revenue, in terms of interest (as a result of idle funds) or delays on project implementation (as a result of financial bottle-necks) may ensue.
Breakeven Analysis
determines the break-even point (BEP) - the point at which sales revenue equal production costs and expenses. The break-even point can also be defined in terms of physical units produced, or of the level of capacity utilization at which sales revenues and production costs and expenses match each other.
is a method that screens and ranks investment proposals by determining the difference between present value of the cash inflows and the cash outflows associated with the investment projects.
The IRR is the discount rate that will cause the net present value of an investment project to be equal to zero; thus, the IRR represents the internal yield promised by a project over its useful life. This term is synonymous with discounted rate of return and time-adjusted rate of return.

Discounted Payback Period is the length of time required for the net revenues of an investment discounted at the investment's cost of capital, to cover the cost of the investment. Like the regular payback method, it ignores cash flows beyond the discounted payback period.
Break-Even Time or Discounted Payback Period
ARR is the rate of return promised by an investment project when the time value of money is not considered. It is computed by dividing a project's annual accounting net income by the initial investment required.
Simple or Accounting Rate of Return (ARR)
Payback period is the length of time that it takes for an investment project to recoup its own initial cost out of the cash receipts that it generates. Bail-out payback period considers the salvage value of the asset as part of cash inflows.
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