Äriplaneerimise tööriist – BalticBiomass4Value

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Income budget
Cash flow


The amount of the investment	1000000	€
The liquidation value of the investment at the end of the project	200000	€
Year	1	2	3	4	5	6	7
Quantity of product 1 sold, kg	200000	500000	500000	500000	500000	500000	500000
Price of product 1	17.0	17.0	17.2	17.4	17.6	17.8	18.0
Quantity of product 2 sold
Price of product 2
Quantity of product 3 sold
Price of product 3
Quantity of product 4 sold
Price of product 4
Quantity of product 5 sold
Price of product 5
Income from sales	3400000	8500000	8600000	8700000	8800000	8900000	9000000
Other operating income, including grants
Total earned income	3400000	8500000	8600000	8700000	8800000	8900000	9000000
Operating costs
Goods
Raw material	2400000	6000000	6000000	6000000	6000000	6000000	6000000
Material	18000	50000	55000	60000	65000	70000	75000
Services, incl rental costs	40000	50000	52500	55000	57500	60000	62500
Fuel	170000	300000	315000	330000	345000	360000	375000
Energy	140000	300000	310000	320000	330000	340000	350000
Wages and salaries	180000	240000	247200	254616	262254	270122	278226
Labor taxes	59400	79200	81576	84023	86544	89140	91815
Depreciation of fixed assets	75000	100000	100000	100000	100000	100000	100000
Insurance	8000	10000	10000	10000	10000	10000	10000
Administrative costs	5000	6000	6500	7000	7500	8000	9000
Other costs	8000	15000	15500	16000	17000	18000	19000
Total operating costs	3103400	7150200	7193276	7236639	7280798	7325262	7370541
Operating profit	296600	1349800	1406724	1463361	1519202	1574738	1629459
Financial expenses
Interest expenses	12000	10000	8000	6000	4000	2000
Other financial expenses
Total financial expenses	12000	10000	8000	6000	4000	2000	0
Profit on economic activities	284600	1339800	1398724	1457361	1515202	15722738	1629460
Income tax
Net profit	284600	1339800	1398724	1457361	1515202	15722738	1629460
Net cash flow	359600	1439800	1498724	1557361	1615202	15822738	1729460
Discount rate	9	9	9	9	9	9	9
Discounted net cash flow	329908.2569	1211850.8543	1157289.9140	1103273.7951	1049770.4750	9434581.6912	946073.8451
	1	2	3	4	5	6	7
Business profitability %	8.7235	15.8800	16.3573	16.8202	17.2637	17.6937	18.1051
Net present value (NPV)=	14432748.8316	€
The project should be undertaken if the NPV> 0.
Background:
The company "Biobusin" plan start with production of bio-xxx. They rent a suitable building for this kind of production and plan to buy the necessary equipment in the spring of 2021 at a price of 1 million euros. In the first year the production volume is 200000 kg, hereinafter 500000 kg per year. The production is sold at a price of 17 euros per kg. Production costs are entered directly into the table. The cost of raw materials per unit of production is 12 euros. The company has 10 employees with an average salary of 2,000 euros per month, 33 percent social tax is paid on the salary cost. The company plans to produce bio-xxx for 7 years. At the end of the planned period, the equipment can be sold at a price of 200,000 euros. The discount rate (WACC) is planned to be 9%.
Conclusion:
A positive NPV indicates that it would be prudent to launch this project under such conditions.


Cash flow forecast	Month
	1	2	3	4	5	6	7	8	9	10	11	12
Opening balance	0	399600	395200	189500	86000	#NEED_UPDATE	#NEED_UPDATE	#NEED_UPDATE	#NEED_UPDATE	#NEED_UPDATE	#NEED_UPDATE	#NEED_UPDATE
Receipts
Capital contributions	400000
Long term loans
Short term loans
Proceeds from sales						150000	250000	300000	400000	500000	600000	600000
Other receipts
TOTAL REVENUE	400000	0	0	0	0	150000	250000	300000	400000	500000	600000	600000
Expenditure
Purchase of fixed assets, construction
Leasing payments			200000	13300	13300	13300	13300	13300	13300	13300	13300	13300
Goods
Raw material				50000	100000	200000	300000	400000	400000	400000	400000	400000
Material				500	1000	1000	1500	2000	2500	3000	3000	3000
Services and rents		4000	4000	4000	4000	4000	4000	4000	4000	4000	4000	4000
Fuel				5000	10000	15000	20000	20000	25000	25000	25000	25000
Energy			500	3500	8000	12000	16000	20000	20000	20000	20000	20000
Wages and salaries					20000	20000	20000	20000	20000	20000	20000	20000
Labor taxes						6600	6600	6600	6600	6600	6600	6600
Insurance				25000			25000			25000
Administrative costs			800	800	800	800	800	800	800	800	800	800
Other costs	400	400	400	400	400	400	400	400	400	400	450	450
VAT
Repaid short term loans
Interest of short term loans
Repaid long term loans
Interest of long term loans (leasing)				1000	990	980	970	960	950	940	930	920
TOTAL EXPENDITURE	400	4400	205700	103500	158490	274080	408570	488060	493550	519040	494080	494070
Closing balance	399600	395200	189500	86000	-72490	#NEED_UPDATE	#NEED_UPDATE	#NEED_UPDATE	#NEED_UPDATE	#NEED_UPDATE	#NEED_UPDATE	#NEED_UPDATE

It can also be impossible to start a very profitable project due to lack of money, because, as a rule, expenses precede earning income. The feasibility of a project can easily be assessed using the actual cash flows of the start-up year. If the cash balance does not turn negative, the project is feasible. To this end, the income and expenditure of the first year must be distributed between the months according to their actual occurrence.

In this example, we assume that the company will be established in January of the following year, the investment will be made in March by leasing, production will start in May, and the money for the sale will be received one month later. For the sake of simplification, we will initially exclude VAT from the calculations.

Conclusion:
Cash flow indicates a widening cash deficit until the end of October. In order to implement this profitable project, it would be necessary to find additional sources of financing in the amount of nearly seven hundred thousand euros (additional equity, short-term loans, etc.).