Question

Investment in capital equipment (in € thousand) n Useful life of the equipment (in years) 2.300 5 Residual value of the equipment at the end of year 5 (in thousand) Investment in raw, auxiliary and operating materials (in thousand) Estimated sales volume in year 1 (in € thousand) Estimated sales volume in years 2 to 5 (in thousand) Sales price per unit (E/unit) Variable costs per unit (E/unit) Fixed costs excluding depreciation (in € thousand) Depreciation, linear over useful life (in € thousand) Required rate of return (% p.a.) Tax rate (%) 300 300 500 600 8,00 5,00 800 400 12% 40%

Prepare a finance plan under the assumption showing -
repayment based on payment surpluses and remaining profit at the end of the period

Answer 1

	n	Year	0	1	2	3	4	5
		Investments:
	a	Equipment Installed Cost	(2,300.00)
	b	Initial Working Capital:	(300)
	c=a+b	Initial Outlay	(2,600)
		Operations:
	.(1)	Sales in units		500	600	600	600	600
	.(2)	Price per unit		8	8	8	8	8
	.(1)*(2)	Sales Revenue		4,000	4,800	4,800	4,800	4,800
	.(1)*5	Variable Production Costs		(2,500)	(3,000)	(3,000)	(3,000)	(3,000)
		Total Fixed Costs (excluding depreciation)		(800)	(800)	(800)	(800)	(800)
		Depreciation		(400)	(400)	(400)	(400)	(400)
		EBIT		300	600	600	600	600
		Taxes(40%)		120	240	240	240	240
		Net Income/(Loss)		180	360	360	360	360
		Add back depreciation		400	400	400	400	400
	d	Total Operating Cash Flow		580	760	760	760	760
		Terminal (End of 5th year)
	5)	Release of working capital						300
	6)	Cash Flow on salvage						300
	e.=5)+6)	Total TerminalCash Flow						600
	CF=c+d+e	PROJECT NET CASH FLOW	(2,600)	580	760	760	760	1,360
		FINANCING PLAN
		Assume 2600 is loan capital with 12% interest
		Loan Balance at end of Year	2,600
	A	Loan Balance at beginning of Year		2,600	2,207.20	1,606.12	961.76	271.01
	B=A*0.12*(1-0.4)	After Tax Interest payment		187.20	158.92	115.64	69.25	19.51
	C=CF-B	Principal Payment		392.80	601.08	644.36	690.75	271.01
	D=B+C	Total Payment		580.00	760.00	760.00	760.00	290.52
	E=A-C	Loan Balance at end of Year		2,207.20	1,606.12	961.76	271.01	0.00