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FINANCIAL PLAN.

DOCX

F I N A N C I A L P L A N AC M E I N C .
FIVE YEARS

LMP CONSULTING

SIDAN 1

17/09/2015

FINANCIAL PLAN.DOCX

C ON T E N T S

Contents ...................................................................................... 2
Five-Year Profit and Loss Projection..................................... 3
Assumptions Income statement.............................................. 3
Income statement ...................................................................... 4
Projected Balance Sheet ........................................................... 5
Assumptions Balance sheet...................................................... 5
Projected Cash Flow ................................................................. 6
Net present value analysis ........................................................ 7
Assumptions NPV .................................................................... 7
Execution of Calculation .......................................................... 7
Sensitivity analysis ..................................................................... 7
Results ......................................................................................... 9
Best case ...................................................................................... 9
Neutral case ................................................................................ 9
Worst case................................................................................... 9
Appendix................................................................................... 10
Calculation Printer................................................................... 10
Calculation Stacker .................................................................. 10
Calculation Printer Line.......................................................... 11

LMP CONSULTING

SIDAN 2

17/09/2015

FINANCIAL PLAN.DOCX

F I V E - Y E A R P RO F I T A N D L OS S P RO J E C T I O N

The plan consists of a five-year Profit & Loss, Balance sheet and Cash flow projection.
ASSUMPTIONS INCOME STATEMENT

Sales forecast
Sales Forecast
2006
(units)
t0
Printer
Stacker
Printer Line
Total products: 170 units

LMP CONSULTING

2007

2008

2009

2010

2011

t1
8
2
2

t2
12
2
4

t3
20
4
8

t4
30
4
12

t5
40
6
16

Royalty cost is estimated to 14 kkr per sold Printer


Spare part revenue is calculated as 3 percent of the cost of sold components and
accumulated materials over time and priced at a sales margin of 50%.
Revenues from Technical service Nordics: In the beginning of the year (t1) revenues
occur 5 days a month and at the end of the year 10 days, which averages to
approximately 7 days per month. Revenues year t2 is 10 days per month. Revenues year
t3 - t5 is calculated based on an annual growth rate of 15%, which gives a billing rate of
80% year t5. Hourly rate is 600 SEK set by the price development variable in the model.
The costs for technical service correspond to salary and social costs for one engineer.
Cost for administration is estimated to increase by 3% annually. Included are salary and
social costs (1.5 times the salary) for: Product manager working halftime, Sales admin
coordinator fulltime, 1/3 part-time working Technical illustrator and one Sales
responsible on fulltime.
R&D costs correspond to one Mechanical designer working fulltime annually except
during year t1 (2007) when we add one Project manager, one Mechanical designer, and
one Automation engineer during one year
Sales and marketing costs are calculated as 20% of total revenues except in year t1 at
which the cost is increased by a one-time charge of 1MSEK related to the market
introduction. Example of cost types: Promotional materials, Customer and Exhibition
trips, Market research and temporary Sales staff
Warranty cost is calculated as 3%, rolling 12 months, of the cost of sold components
and materials
Company tax 28 %
Depreciation of test equipment @ 852kSEK is done over a 5-year straight line
depreciation scheme, whereafter the book value is zero. The test equipment is scrapped
at zero cost in year t5.

SIDAN 3

17/09/2015

FINANCIAL PLAN.DOCX

I N C O M E S TA T E M E N T

Income statement

2006

2007

2008

2009

2010

2011

t0

t1

t2

t3

t4

t5

Revenues:
Gross operating revenues
Spare parts revenues
Tech Serv Nordics
revenues
COGS machines
COGS Spare parts
COGS Tech Serv Nordics
Royalty
Gross Profit
Operating expenses
Administration
Depreciation
R&D
Sales and Marketing
Warranty costs
Net profit
Other revenues:
Sales of fixed assets
Total other revenues
Other expenses:
Other
Interest
Total other expenses
Profit before tax
Income tax
Profit after tax

LMP CONSULTING

0
0
0

8,998
346
370

13,995
883
528

25,161
1,848
607

36,570
3,250
698

49,150
5,134
803

0
0
0
0
0

-6,455
-173
-412
-126
2,548

-10,038
-441
-412
-196
4,318

-18,055
-924
-412
-336
7,889

-26,232
-1,625
-412
-504
11,745

-35,260
-2,567
-412
-784
16,064

0
0
0
0
0
0

-2,200
-170
-1,922
-2,800
-173
-4,717

-2,266
-170
-458
-2,799
-268
-1,643

-2,334
-170
-458
-5,032
-483
-588

-2,404
-170
-458
-7,314
-701
698

-2,476
-170
-458
-9,830
-942
2,188

0
0

0
0
0
0
0
0

0
0
0
-4,717
1,321
-3,396

0
0
0
-1,643
460
-1,183

0
0
0
-588
165
-423

0
0
0
698
-195
503

0
0
0
2,188
-613
1,576

SIDAN 4

17/09/2015

FINANCIAL PLAN.DOCX

P RO J E C T E D B A L A N C E S H E E T

This is the projected balance sheet.


ASSUMPTIONS BALANCE SHEET

Account receivables (debtors) is set to 5 % of Gross operating revenues and are assumed
to be paid in the period following the sales period
Inventory (stocks) is set to 6 % of Gross operating revenues
Accounts payable (creditors) is set to 50 % of the inventory valuation and shall be paid
in the period following the inventory period
The investment in the test equipment is done in year t0
All financing done by owners equity, no debt

Balance sheet
t0
Current assets (working capital):
Cash
Account receivable (debtors)
Inventory (stocks)
Total current assets
Fixed assets:
Gross plant and equipment
Accumulated depreciation
Net fixed assets
Total assets
Current liabilities (working capital):
Accounts payable (creditors)
Total current liabilities
Long-term liabilities and equity:
Debt
Equity:
Paid-in equity capital
Retained earnings
Total equity
Total long-term liabilities and equity
Total liabilities and equity

LMP CONSULTING

t1

t2

t3

t4

t5

148
0
0
148

152
0
540
692

540
450
840
1,830

303
700
1,510
2,512

75
1,258
2,194
3,527

873
1,828
2,949
5,651

852
0
852
1,000

852
-170
682
1,374

852
-341
511
2,341

852
-511
341
2,853

852
-682
170
3,698

852
-852
0
5,651

0
0

270
270

420
420

755
755

1,097
1,097

1,475
1,475

1,000
0
1,000
1,000
1,000

4,500
-3,396
1,104
1,104
1,374

6,500
-4,579
1,921
1,921
2,341

7,100
-5,002
2,098
2,098
2,853

7,100
-4,499
2,601
2,601
3,698

7,100
-2,924
4,176
4,176
5,651

SIDAN 5

17/09/2015

FINANCIAL PLAN.DOCX

P RO J E C T E D C A S H F L OW

follows as a result of the Profit and Loss Projection and the Projected Balance Sheet

Cash flow statement


t0

t1

t2

t3

t4

t5

Total

Operating activities
Net income
Depreciation
Accounts receivable
Inventories
Accounts payable
Amortization
Other
Total operating activities

0
0
0
0
0
0
0
0

-4,717
170
0
-540
270
0
0
-4,816

-1,643
170
-450
-300
150
0
0
-2,072

-588
170
-250
-670
335
0
0
-1,002

698
170
-558
-685
342
0
0
-32

2,188
170
-570
-755
377
0
0
1,411

-4,061
852
-1,828
-2,949
1,475
0
0
-6,512

Investing activities
Capital expenditures
Acquisition of business
Sale of fixed assets
Interest
Total investing activities

-852
0
0
0
-852

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

-852
0
0
0
-852

1,321

460

165

-195

-613

1,137

0
0
0
1,000
0

0
0
0
3,500
0

0
0
0
2,000
0

0
0
0
600
0

0
0
0
0
0

0
0
0
0
0

0
0
0
7,100
0

1,000

3,500

2,000

600

7,100

Cumulative cash flow

148

388

-238

-227

798

873

Beginning cash balance


Ending cash balance

0
148

148
152

152
540

540
303

303
75

75
873

Taxation
Total taxation
Financing activities
Long-term debt/financing
Preferred stock
Total cash dividends paid
Common stock
Other financing cash flow
items
Total financing activities

LMP CONSULTING

SIDAN 6

17/09/2015

FINANCIAL PLAN.DOCX

N E T P R E S E N T VA L U E A NA LY S I S
ASSUMPTIONS NPV

The principle for valuating an investments cash flows (e.g. a new product) is to include
all changes that impact cash flows in the company as a whole if it were to accept the
investment, and only these changes. This means, among other things, that in case of a
negative sales result in the model then a positive cash flow from taxes will occur as the
company's total cash flow related to taxes is assumed to be reduced by the same amount.
The principle further implies that employee costs for employees already employed before
the project starts will not be included in the model, only additional employees hired
specifically for the investment (the project) will have their costs included. Opportunity
costs such as cancelled revenue streams from alternative investments to the investment
project in question, if such alternatives exist, will be included as a cost, and so on.
Opportunity cost: Billing revenue from 1 designer and project manager per year = 11
months x (0.9 x (150h x 550kr + 75h x 700kr))
EXECUTION OF CALCULATION

The model is looking 5 years into the future. Even if intentions are to continue with
activities over several years thereafter, I choose to limit the NPV analysis to t5. Any cash
flows thereafter are ignored.
The Balance sheet is adjusted as follows: For each year, a dividend cash flow to the
equity owners (the share holders) is withdrawn in as large a size as possible without
affecting the basic conditions needed to carry out the investment. The final year, year t5,
the "Project Company" is liquidated as to withdraw the final cash flow to the equity
owners.
A discounted cash flow analysis is applied over these cash flows at an interest rate that
weighs in the needed return on investment given the assessed risk level of the project. I
set the discount rate to 10%.
SENSITIVITY ANALYSIS

Three scenarios are carried out in where the model is changed over five variables
1. Raw mtrl: Price changes in materials and components
2. Inflation
3. Cost reduction: Reductions in costs realized through other choice of components and
alternative design solutions, which are to be delivered in an ongoing cost reduction
project
4. Vol purch: Volume discounts on purchased modules. Current prices are based on
purchases one-by-one. It is reasonable to expect a reduction in price based on volume
purchases.
5. Price: Price level development in the price list. In the long run, adjustments are made for
inflation, material cost development and currency risk. The adjustment of the price
variable in the scenarios does not, however, take into account the Price elasticity of
demand, or what the market is willing to pay.
Factors that impact:
Material: Price changes in materials and components, Inflation, Volume discounts on
purchased modules, and the cost reduction project
Components: Inflation and the cost reduction project
Labor costs: Inflation

LMP CONSULTING

SIDAN 7

17/09/2015

FINANCIAL PLAN.DOCX

Factor table with year indices


Case
Factors
Best
Cost reduction
Best
Inflation
Best
Price list
Best
Raw mtrl
Best
Vol purch.
Worst
Cost reduction
Worst
Inflation
Worst
Price list
Worst
Raw mtrl
Worst
Vol purch.

t0

t1

t2

t3

t4

t5

100
100
100
100
100
100
100
100
100
100

90
103
103
103
85
100
103
88
110
95

85
106
106
106
75
100
107
96
120
93

80
109
109
109
70
100
112
104
130
91

75
112
112
112
70
100
118
112
140
89

75
112
112
112
70
100
125
120
150
87

Neutral Case: All factors held at index 100

LMP CONSULTING

SIDAN 8

17/09/2015

FINANCIAL PLAN.DOCX

R E S U LT S
BEST CASE

t0

t1

t2

t5

4,461

8,536

Fixed-asset cash flow

-852

808

-373

-1,385

-2,632

-3,813

-852

-2,184

499

3,076

5,904

12,576

Less tax shields

Less opportunity costs

-1,337

-1,337

-1,337

-1,337

-1,337

-852

-3,521

-838

1,740

4,568

11,239

-852

-3,200

-692

1,307

3,120

6,979

t3

t4

t5

1,046

5,810

FCF

FCF*
rv*:

10.00%

Discounting

NPV (kkr)

872

t4

Operating cash flow1


Less income tax

-2,992

t3

16,389

6,661
NEUTRAL CASE

t0
Operating cash flow

t1
0

Fixed-asset cash flow

t2

-3,791

-1,030

58

-852

1,034

168

-132

-497

-920

-852

-2,757

-862

-74

549

4,890

Less tax shields

Less opportunity costs

-1,337

-1,337

-1,337

-1,337

-1,337

-852

-4,094

-2,199

-1,411

-787

3,554

-852

-3,721

-1,817

-1,060

-538

2,207

Less income tax


FCF

FCF*
rv*:

10.00%

Discounting

NPV

-5,781
WORST CASE

t0
Operating cash flow
Fixed-asset cash flow
Less income tax

t1

t2

t3

t4

t5

-4,942

-2,498

-2,353

-2,223

1,955

-852

1,365

590

522

368

211

-852

-3,577

-1,908

-1,831

-1,855

2,165

Less tax shields

Less opportunity costs

-1,337

-1,337

-1,337

-1,337

-1,337

-852

-4,914

-3,245

-3,168

-3,192

829

-852

-4,467

-2,681

-2,380

-2,180

515

FCF

FCF*
rv*:
NPV

10.00%

Discounting

-12,045

Operating cash flow = Operating profit Less change in net working capital Plus overhead changes

LMP CONSULTING

SIDAN 9

17/09/2015

FINANCIAL PLAN.DOCX

APPENDIX
CALCULATION PRINTER
Printer
Base unit

Labor
16,910.00 kr

Material
117,557.00 kr

Top cover
El + kit+ cables
Conn. box
Testing
Cleaning
Packing
Sum

Components

Direct Cost

134,469.00 kr

268,936.00 kr

43,500.00 kr

43,500.00 kr

20,648.00 kr

67,971.00 kr

88,619.00 kr

488.00 kr

1,605.00 kr

2,093.00 kr

12,000.00 kr

12,000.00 kr

4,499.05
kr

4,499.05 kr
7,500.00 kr
427,147.05 kr

577,087.00 kr

26.0%

Infeed Belt

39,000.00 kr

39,000.00 kr

65,000.00 kr

40.0%

Outfeed Belt

39,000.00 kr

39,000.00 kr

65,000.00 kr

40.0%

325,545.00 kr

505,147.05 kr

707,087.00 kr

28.6%

Price

Margin

54,545.05 kr

125,057.00 kr

Margin

247,545.00 kr

SUM

54,545.05 kr

7,500.00 kr

Price

125,057.00 kr

CALCULATION STACKER
Stacker
Base unit

Labor
14,104.97 kr

Material
98,017.18 kr

Ladder
Top cover
El + kit+ cables

8,249.00 kr

Protective cover
Cleaning cover

Components
112,122.15 kr

Direct Cost
224,244.30 kr

2,405.00 kr

2,405.00 kr

39,743.00 kr

39,743.00 kr

27,156.00 kr

35,405.00 kr

16,488.00 kr

16,488.00 kr

7,644.00 kr

7,644.00 kr

Testing

9,600.00 kr

9,600.00 kr

Cleaning

4,499.05 kr

4,499.05 kr

Packing
Sum

7,500.00 kr
205,558.15 kr

347,528.35 kr

456,094.00 kr

23.8%

Infeed Belt

39,000.00 kr

39,000.00 kr

65,000.00 kr

40.0%

Outfeed Belt

39,000.00 kr

39,000.00 kr

65,000.00 kr

40.0%

283,558.15 kr

425,528.35 kr

586,094.00 kr

27.4%

SUM

LMP CONSULTING

36,453.02 kr

36,453.02 kr

105,517.18 kr

7,500.00 kr

105,517.18 kr

SIDAN 10

17/09/2015

FINANCIAL PLAN.DOCX

CALCULATION PRINTER LINE


Printer line

Labor

Material

Components

Direct Cost

Base machine Printer

38,046

110,057

247,545

395,648

Base machine Printer Stacker

22,354

90,517

205,558

318,429

Price

Margin

Added
1,225

1,225

Opt. Top Cover, Printer Line

Opt. Cable kit Printer Printer Line

49,770

49,770

Top Cover, Conveyor High Printer

-43,500

-43,500

Opt. Top Cover (funnel) Stacker

-39,743

-39,743

Protective cover Stacker

-16,488

-16,488

Cleaning cover Stacker

-7,644

-7,644

Subtracted

Testing

21,600

21,600

Cleaning

9,000

9,000

Packing
Sum

15,000
91,000

215,574

Infeed Belt
Outfeed Belt
SUM

LMP CONSULTING

91,000

215,574

SIDAN 11

15,000
396,723

703,298

954,381 kr

26.3%

39,000

39,000

65,000

40.0%

39,000

39,000

65,000

40.0%

474,723

781,298

1,084,381 kr

27.9%

17/09/2015