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WELCOME

GROUP 5

Atikur Rahman

Rafiqul Islam

Rehnuma Hoque

Razibul Islam

So, what are we dealing with?

“Financial Estimates And Projection”

Why is it necessary in a project?

1. Can we produce the goods or service?

2. Can we sell the goods or service?

3. Can we earn a satisfactory return on the investment made in the project?

1. Technical appraisal2. Market and demand appraisal3. Financial appraisal

Let’s hear a story about a Project

Mr. Geek

Miss. Cute

Geek & Cute Ltd.

One day Mr. Geek was driving his car

At that time he saw that there were Green Coconuts selling on the street

But he couldn’t because that won’t be polite

Then again he saw there was Sugar Cane juice selling on the street

And again he couldn’t because that is unhygienic

Suddenly he got an idea and called his business partner Miss. Cute

And his idea was

To sell these

Green Coconut water

Sugar Cane Juice Date Juice

Into these forms

Green Coconut water

Sugar Cane Juice Date Juice

And Miss. Cute happily agreed with Mr. Geek’s plan

So, let’s get started

Estimated Cost of the Project

Estimated Means of Finance

Now, we are going to find out

1. Profitability Estimates2. Projected Cash Flow3. Projected Balance Sheet

Profitability Estimates

The company would work for 300 days on a 2 shift basis. The installed capacity on this basis works out to 2880 TPA.

The company will start production on April 1, of the year 1. The expected capacity utilization will be 50 percent in the first year, 60 percent in the second year and 70 percent for the third year and beyond.

2880*.50=1440

2880*.60=1728

2880*.70=2016

The average sales realization per kg of the product will be 12, net of excise duty.

1440*12/1000=17.28

1728*12/1000=20.74

2016*12/1000=24.19

The cost of raw materials and consumables will be 65 percent of sales; the cost of power will be 4 percent of sales.

17.28*.65=11.23

17.28*.04=.69

Wages and salaries are expected to be 0.9 million, 1 million and 1.2 million for the first, second, and third operating years. Thereafter, they would rise at the rate of 5 percent per year.

1.2+(1.2*.05)=1.26

Factory overhead expenses will be 50000 for the first year. They will increase at the rate of 6 percent per year subsequently. Administration expenses will be 100000 per year. Selling expenses will be 10 percent of sales.

The term loan will be repaid in 16 equal half yearly installments, with the first installment falling due at the end of the second operating year. The interest rate on the outstanding term loan will be 14 percent.

Term Loan Calculation

6.4/16=0.4

.4

.4 6.4*.14*.50

The bank finance for working capital will cost 18 percent.

The suppliers of raw materials and consumables will provide trade credit for half a month.

Working Capital Calculation

(11.23*1.5)/12 (11.23*.03)/12 (11.23*.5)/12 (17.28*1)/12

3.39*.25

1.4*.5/1.5

The depreciation for company law purposes are as follows:

The depreciation rates for income tax purposes are as follows, under the written down value method:

Depreciation calculations

8.490.39*1.15/8.49

0.39*.75/8.49

1.83*.0334

7.59*.0809

0.49*.0515

Building: 1) 1.83*.1=0.183, 2) (1.83-0.183)*.1=0.165Plant and Machinery and Misc. fixed assets: 1) (7.59+.49)*.333=2.693, 2) (8.08-2.693)*.333=1.795

The preliminary expenses may be written off in 10 equal installments

0.2/10=0.02

The income tax rate applicable is 45 percent. Further 30 percent of Gross Total Income will be allowed as deduction.

Tax Calculations

-1.59-0.12=-1.71

0.78*.30=0.234

0.55*0.45=0.25

The firm plans to pay dividend from the second year. The dividend rate is proposed to be 12 percent for second year. Thereafter, it would be enhanced by 2 percent every alternate year.

Projected Cash Flow Statements

.59+.90+.372.48-2.07 2.92-2.48

11.44-.85-.20

6.4-6.4 6.4-6.0 6.0-5.2

3.39-.47 4.06-.56-2.92

4.78-.66-.58

.85 .85+.46 1.31+.81

Projected Balance Sheets

.59+.66 1.25+1.18

It’s decision time

After analyzing the Profitability Estimates, Projected Cash flow statements and Projected Balance Sheet, Mr. Geek and Miss Cute find the project feasible

And they decided to go for it

Coffee with Dr. Mahfuzul Hoque

Public Opinion

Thank You