y ie5003 term paper

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1

Economic feasibility study on Three

Business Proposals

IE 5003 Cost Analysis and Engineering Economy

Term Paper – Semester-2 (2010-11)

Submitted by,

Madheswaran Perumalsamy Govindharaj (A0077651Y)

Master of Science (Industrial & Systems Engineering)

Faculty of Engineering,

Department of Industrial & Systems Engineering,

National University of Singapore.



2

Contents

S.No Description Page

Number

1 Executive Summary 22 Problem Description 6

3 Cash Flow Models 8

Before Tax Cash Flow Analysis 9

5 Base Case Solution 10

Depreciation Calculations 11

After Tax Cash Flow Analysis 12

After Tax Cash Flow Analysis-Summary 14

6 Sensitivity Analysis

FMCG Distribution Project 15

Fast Food Outlet Project 19

Cold Storage Project 25

7 Probabilistic Risk Analysis

FMCG Distribution Project 30

Fast Food Outlet Project 34

Cold Storage Project 36Results for Probabilistic Risk Analysis 39

8 What if Analysis 40

9 Recommendations & Conclusion 50



3

Executive Summary

Mr. X has significance experience in Quality assurance and Marketing of Food and Beverages products. He

wants to start his own business in this field. Now, he got chance to take up any of the following businesses.

1. FMCG products distributorship (dry FMCG Products)2. Fast Food outlet (with his own brand)

3. Cold storage (For Fruits and Vegetables)

Through his contacts he has collected some information and data of these business and he need to pick a

economically viable project based on his data.

Economic feasibility of three Projects are analyzed using cost analysis techniques, based on the data Mr. X has

provided in order to help him.

After Tax MARR = 12.4%

Before Tax MARR=15%

Study Period = 15 Years

Before Tax Cash Flow Analysis

Result: Fast Food Project looks lucrative among three.

After Tax Cash Flow Analysis

Result: Cold Storage Project seems to be more profitable among three (and FMCG distributorship Project

also almost equal to Cold Storage project and hence risk profile of these businesses are analyzed.)

BTCF ANALYSIS RESULTS

FMCG product distributorship Fast food Franchise Cold Storage

Present Worth (PW) 331,696.50$ 344,848.60$ 338,937.90$

Future Worth (FW) 2,701,808.50$ 2,807,332.00$ 2,760,892.50$

Annual Worth (AW) 56,720.10$ 58,969.11$ 57,958.38$

Capital Recovery (CR) 933,577.50$ 394,776.00$ 977,620.50$

Annual Profit 990,400.00$ 453,800.00$ 1,035,700.00$

IRR % 16.023% 17.611% 16.041%

ERR % 15.419% 16.012% 15.417%

ATCF ANALYSIS RESULTS


Present Worth (PW) 426,872.07$ 377,759.21$ 468,433.10$

IRR % 13.590% 14.990% 13.710%



4

Probabilistic Analysis for Risk: (Using Monte Carlo simulation in Excel)

Observation: All three Projects involve high risk factors in it.

Sensitivity Analysis:

Sensitivity analysis exercise is done to find the significant factors that affect the Worth.

Probabilistic Analysis Results

Parameters Values Remarks

Mean (280,193.00)$

Std Deviation 2,460,749.00$

Prob (PW =< 0) ~ 55.000%


Mean (111,672.00)$


Prob (PW =< 0) ~ 45.000%


Mean (212,512.00)$


Prob (PW =< 0) ~ 45.000%

High Risk Project with negetive

mean


mean


mean

FMCG distributorship

Fast Food Franchise Outlet

Cold Storage

Detarministic Analysis - Sensitivity

Factors Swing^2 (PW) Swing^2 (IRR)

Profit 49.800% 51.900%

Sales 29.100% 29.500%


Wastage 55.900% 51.800%

Profit 31.400% 33.100%

Sales 8.000% 9.600%


Profit 86.200% 87.100%

Sales 8.800% 7.900%

Wastage 3.300% 3.000%

Cold Storage

FMCG product distributorship




5

FMCG business has Profit & Sales volume as significant factors

Fast Food & Cold Storage business have Wastage, Profit & Sales volume as significant factors.

What If Analysis:

Mr. X wants to minimize the risk by controlling the quality in 6 sigma level and with high class marketing

techniques, he wants to maintain the higher profit margins. Since he has considerable experience in Quality

assurance & Marketing of Food and Beverages, he believes that he could be able to control the quality and can

market the product much efficiently with no additional costs.

* As FMCG product pricing and Marketing are controlled by FMCG companies themselves, distributor has no

role in regulating them, hence considered only Fast Food & Cold Storage.

Break-Even Values of Sensitive Factors

Factors Break Even Point

Profit 17.000%

Sales 7,680,000.00$


Wastage 18.000%

Profit 51.000%

Sales 1,770,000.00$


Profit 40.000%

Sales 4,100,000.00$

Wastage 11.000%



Cold Storage

Profit Margin limit Low 50.000%

Mean 65.000%

High 100.000%

Wastage control limit Low 5.000%

Mean 7.500%

High 10.000%

What If condition (strictly

controlled by 6 sigma level

quality control and high class

marketing strategy in Fast food

& Cold storage business)



6

Result: Cold Storage Project is become profitable and low risk

What If condition Results


Mean 5,027,304.00$


Prob (PW =< 0) ~ 2.000%


Mean 44,844.00$


Prob (PW =< 0) ~ 40.000%


Low Risk Project with large

mean

High Risk Project with low mean

Cold Storage



7

Problem Description

Mr. X has significance experience in Quality assurance and Marketing of Food and Beverages products. He

wants to start his own business in this field. Now, he got chance to take up any of the following businesses.

1. FMCG products distributorship (dry FMCG Products)2. Fast Food outlet (with his own brand)

3. Cold storage (For Fruits and Vegetables)

Through his contacts he has collected some information and data of these business and he need to pick a

economically viable project based on his data.

Economic feasibility of three Projects are analyzed using cost analysis techniques, based on the data Mr. X has

provided in order to help him. Below are the data provided by him on investments, expected Sales and

overhead expenses.

After Tax MARR = 12.4%

Before Tax MARR=15%

Study Period = 15 Years

Initial Investments Cost/Unit Unit Requirement Total Cost Market Value @ End 15 yr

Land 300.00$ Square feet 10000 3,000,000.00$ 3,000,000.0$

Shed constructed area 300.00$ Square feet 8000 2,400,000.00$ 600,000.0$

Racking 100.00$ Square feet 4200 420,000.00$ 105,000.0$

Furnitures & Interior 50.00$ Square feet 100 5,000.00$ -$

Handling Equipments 2,500.00$ Units 3 7,500.00$ -$

Transportation vehicles (delivery vans) 40,000.00$ Units 2 80,000.00$ 8,000.0$

IT infrastructure 3,000.00$ Units 1 3,000.00$ -$

5,915,500.00$ 3,713,000.0$

Expenses Expected Expenses (Per Month) Expenses (Per year)

Labor(Wages including bonus) 2,000.00$ Persons 10 20,000.00$ 260,000.0$

Electricity 1,500.00$ - - 1,500.00$ 18,000.0$

Fuel 2,000.00$ - - 2,000.00$ 24,000.0$

Phone bills 250.00$ - - 250.00$ 3,000.0$

Stationaries 50.00$ - - 50.00$ 600.0$

Purchases 600,000.00$ - - 600,000.00$ 7,200,000.0$

7,505,600.0$

Revenues Expected

Sales 708,000.00$ - - 708,000.00$ 8,496,000.0$

8,496,000.0$

Market Value of business @ end of life 3,713,000.00$ - - 3,713,000.00$ 3,713,000.0$

3,713,000.0$

Study Period years 15 Years




8

Initial Investments Cost/Unit Unit Requirement Total Cost Market Value @ End of Lif

Land 300.00$ Square feet 4000 1,200,000.00$ 1,200,000.0$

Shed constructed area 330.00$ Square feet 2500 825,000.00$ -$

Kitchen Equipments 100,000.00$ Sets 1 100,000.00$ -$

Furnitures & Interior 150.00$ Square feet 1800 270,000.00$ -$

Franchise fees (Licence) 8,000.00$ Units 1 8,000.00$ -$

Transportation vehicles (motor cycles) 10,000.00$ Units 5 50,000.00$ -$


2,456,000.00$ 1,200,000.0$

Expenses Expected Cost/Month Unit Requirement Expenses (Per Month) Expenses (Per year)


Electricity 2,000.00$ - - 2,000.00$ 24,000.0$

Fuel 2,000.00$ - - 2,000.00$ 24,000.0$

Phone bills 800.00$ - - 800.00$ 9,600.0$

Stationaries 50.00$ - - 50.00$ 600.0$

Purchases 125,000.00$ - - 125,000.00$ 1,500,000.0$

1,766,200.0$

Revenues Expected

Sales 185,000.00$ - - 185,000.00$ 2,220,000.0$

2,220,000.0$

Market Value of business @ end of life 1,200,000.00$ - - 1,200,000.00$ 1,200,000.0$

1,200,000.0$


Fast Food Franchise operations

Initial Investments Cost/Unit Unit Requirement Total Cost Market Value @ End of Life

Land 300.00$ Square feet 10000 3,000,000.00$ 3,000,000.00$

Shed constructed area 300.00$ Square feet 6000 1,800,000.00$ -$Cooling Equipments 300.00$ Square feet 4000 1,200,000.00$ -$

Generator 20,000.00$ Units 1 20,000.00$ -$

Furnitures 50.00$ Square feet 50 2,500.00$ -$

Handling Equipments 10,000.00$ Units 2 20,000.00$ -$

Transportation vehicles (Containers) 20,000.00$ Units 2 40,000.00$ -$


6,085,500.00$ 3,000,000.00$

Expenses Expected Expenses (Per Month) Expenses (Per year)


Electricity 3,000.00$ - - 3,000.00$ 36,000.00$

Fuel 2,000.00$ - - 2,000.00$ 24,000.00$

Phone bills 100.00$ - - 100.00$ 1,200.00$Stationaries 50.00$ - - 50.00$ 600.00$

Purchases 400,000.00$ - - 400,000.00$ 4,800,000.00$

5,024,300.00$

Revenues Expected

Sales 505,000.00$ - - 505,000.00$ 6,060,000.00$

6,060,000.00$

Market Value of business @ end of l ife 3,000,000.00$ - - 3,000,000.00$ 3,000,000.00$

3,000,000.00$


Cold Storage



9

Cash Flow Models Development

• FMCG products distributorship (dry FMCG Products)

• Fast Food outlet (with his own brand)

Annual Cash Flow = $990,400 from EoY 1 to 15

MV(15) = $3,713,000

Initial Investment = $5,915,500

MV(15) = $1,200,000

Annual Cash Flow = $453,800 from EoY 1 to 15




10

• Cold storage (For Fruits and Vegetables)

First, let us calculate the Present, Future and Annual Worth using Before tax MARR = 15 %

Before Tax Cash Flow Analysis

Finding PW/AW/FW values

Initial Investment 5,915,500.00$ Initial Investment 2,456,000.00$ Initial Investment 6,085,500.00$

Annual Expenses 7,505,600.00$ Annual Expenses 1,766,200.00$ Annual Expenses 5,024,300.00$

Revenue 8,496,000.00$ Revenue 2,220,000.00$ Revenue 6,060,000.00$

Market value @ end 3,713,000.00$ Ma rket va lue @ end 1,200,000.00$ Ma rket va lue @ end 3,000,000.00$

Study Period 15 Study Period 15 Study Period 15

Before Tax MARR % 15% Before Tax MARR % 15% Before Tax MARR % 15%

Present Worth (PW) 331,696.50$ Present Worth (PW) 344,848.60$ Present Worth (PW) 338,937.90$

Future Worth (FW) 2,701,808.50$ Future Worth (FW) 2,807,332.00$ Future Worth (FW) 2,760,892.50$

Annual Worth (AW) 56,720.10$ Annual Worth (AW) 58,969.11$ Annual Worth (AW) 57,958.38$

Capital Recovery (CR) 933,577.50$ Ca pita l Recovery (CR) 394,776.00$ Ca pita l Re covery (CR) 977,620.50$Annual Profit 990,400.00$ Annual Profit 453,800.00$ Annual Profit 1,035,700.00$


MV(15) = $3,000,000

Annual Cash Flow = $1,035,700 from EoY 1 to 15




11

Base Case Solution

Since After Tax Cash flow only will give clear idea, we have to do ATCF Analysis including the Capital

allowances. First we calculate the depreciation values for all investments in all three projects as per 6th

schedule guidelines.

Finding IRR (Using goal seek)


Interest rate i% 16.023% Interest rate i% 17.611% Interest rate i% 16.041%



Annual Expenses 7,505,600.00$ Annual Expenses 1,766,200.00$ Annual Expenses 5,024,300.00$Market value @ end 3,713,000.00$ Ma rket va lue @ end 1,200,000.00$ Ma rket va lue @ end 3,000,000.00$


(P/F,i%,15) 0.107605214 (P/F,i%,15) 0.087759174 (P/F,i%,15) 0.107356

(P/A,i%,15) 5.569428354 (P/A,i%,15) 5.180010999 (P/A,i%,15) 5.56476769

PW (i%) 0.00$ PW (i%) 0.00$ PW (i%) 0.00$

IRR % 16.023% IRR % 17.611% IRR % 16.041%


Finding ERR





Annual Expenses 7,505,600.00$ Annual Expenses 1,766,200.00$ Annual Expenses 5,024,300.00$

Market value @ end 3,713,000.00$ Ma rket va lue @ end 1,200,000.00$ Ma rket va lue @ end 3,000,000.00$

(F/A,15 %,15) 47.58 (F/A,15 %,15) 47.58 (F/A,15 %,15) 47.5

PW of Cash outflows 5,915,500.00$ PW of Cash outflows 2,456,000.00$ PW of Cash outflows 6,085,500.00$

FW of Cash Inflows 50,836,232.00$ FW of Ca sh Infl ows 22,791,804.00$ FW of Ca sh Inflows 52,278,606.00$

ERR % 15.419% ERR % 16.012% ERR % 15.417%


Summary

Present Worth (PW) 331,696.50$

Future Worth (FW) 2,701,808.50$

Annual Worth (AW) 56,720.10$

Capital Recovery (CR) 933,577.50$

Annual Profit 990,400.00$

IRR % 16.023%

ERR % 15.419%

16.041%

15.417%

Reject Select Reject

17.611%

16.012%

338,937.90$

2,760,892.50$

57,958.38$

977,620.50$

1,035,700.00$


344,848.60$

2,807,332.00$

58,969.11$

394,776.00$

453,800.00$



13

Now, After tax cash flow analysis is carried out including the Capital allowances for tax benefits.

Tax=17% After Tax MARR= 12.40%

End of the Year Before Tax Cash flow Depreciation Taxable IncomeIncome tax Cash

Flow

After Tax Cash

FlowPW of ATCF

k A B C=A-B D=-tC E=A+D F=E/(1+i)^k0 (5,915,500.00)$ -$ -$ -$ (5,915,500.00)$ (5,915,500.0$

1 990,400.00$ 823,166.67$ 167,233.33$ (28,429.67)$ 961,970.33$ 855,845.4$

2 990,400.00$ 96,666.67$ 893,733.33$ (151,934.67)$ 838,465.33$ 663,670.4$

3 990,400.00$ 96,666.67$ 893,733.33$ (151,934.67)$ 838,465.33$ 590,454.1$

4 990,400.00$ 96,666.67$ 893,733.33$ (151,934.67)$ 838,465.33$ 525,315.0$

5 990,400.00$ 96,666.67$ 893,733.33$ (151,934.67)$ 838,465.33$ 467,362.1$

6 990,400.00$ 96,666.67$ 893,733.33$ (151,934.67)$ 838,465.33$ 415,802.6$

7 990,400.00$ 85,000.00$ 905,400.00$ (153,918.00)$ 836,482.00$ 369,056.1$

8 990,400.00$ 85,000.00$ 905,400.00$ (153,918.00)$ 836,482.00$ 328,341.7$

9 990,400.00$ 85,000.00$ 905,400.00$ (153,918.00)$ 836,482.00$ 292,119.0$

10 990,400.00$ 85,000.00$ 905,400.00$ (153,918.00)$ 836,482.00$ 259,892.3$11 990,400.00$ 84,600.00$ 905,800.00$ (153,986.00)$ 836,414.00$ 231,202.1$

12 990,400.00$ 84,600.00$ 905,800.00$ (153,986.00)$ 836,414.00$ 205,695.8$

13 990,400.00$ 84,600.00$ 905,800.00$ (153,986.00)$ 836,414.00$ 183,003.4$

14 990,400.00$ 84,600.00$ 905,800.00$ (153,986.00)$ 836,414.00$ 162,814.4$

15 990,400.00$ 84,600.00$ 905,800.00$ (153,986.00)$ 836,414.00$ 144,852.7$

15 3,713,000.00$ -$ (133,000.00)$ 22,610.00$ 3,735,610.00$ 646,944.2$

426,872.0$

Balancing Allowances or Charges

Initial InvestmentsMarket Value @

End 15 yrsBook Value Charging/Balancing

Land 3,000,000.00$ 3,000,000.00$ -$

Shed constructed area 600,000.00$ 720,000.00$ (120,000.00)$

Racking 105,000.00$ 126,000.00$ (21,000.00)$

Furnitures & Interior -$ -$ -$

Handling Equipments -$ -$ -$

Transportation vehicles 8,000.00$ -$ 8,000.00$

IT infrastructure -$ -$ -$

3,713,000.00$ 3,846,000.00$ (133,000.00)$




14



Flow

After Tax Cash

FlowPW of ATCF

k A B C=A-B D=-tC E=A+D F=E/(1+i)^k

0 (2,456,000.00)$ -$ -$ -$ (2,456,000.00)$ (2,456,000.0$

1 453,800.00$ 359,533.33$ 94,266.67$ (16,025.33)$ 437,774.67$ 389,479.2$2 453,800.00$ 66,283.33$ 387,516.67$ (65,877.83)$ 387,922.17$ 307,052.0$

3 453,800.00$ 66,283.33$ 387,516.67$ (65,877.83)$ 387,922.17$ 273,177.9$

4 453,800.00$ 66,283.33$ 387,516.67$ (65,877.83)$ 387,922.17$ 243,040.8$

5 453,800.00$ 66,283.33$ 387,516.67$ (65,877.83)$ 387,922.17$ 216,228.5$

6 453,800.00$ 64,683.33$ 389,116.67$ (66,149.83)$ 387,650.17$ 192,239.2$

7 453,800.00$ 51,350.00$ 402,450.00$ (68,416.50)$ 385,383.50$ 170,031.3$

8 453,800.00$ 51,350.00$ 402,450.00$ (68,416.50)$ 385,383.50$ 151,273.4$

9 453,800.00$ 46,350.00$ 407,450.00$ (69,266.50)$ 384,533.50$ 134,288.0$

10 453,800.00$ 46,350.00$ 407,450.00$ (69,266.50)$ 384,533.50$ 119,473.3$

11 453,800.00$ 24,750.00$ 429,050.00$ (72,938.50)$ 380,861.50$ 105,278.0$

12 453,800.00$ 24,750.00$ 429,050.00$ (72,938.50)$ 380,861.50$ 93,663.7$

13 453,800.00$ 24,750.00$ 429,050.00$ (72,938.50)$ 380,861.50$ 83,330.7$

14 453,800.00$ 24,750.00$ 429,050.00$ (72,938.50)$ 380,861.50$ 74,137.6$

15 453,800.00$ 24,750.00$ 429,050.00$ (72,938.50)$ 380,861.50$ 65,958.7$

15 1,200,000.00$ (247,500.00)$ 42,075.00$ 1,242,075.00$ 215,106.3$

377,759.2$




Land 1,200,000.00$ 1,200,000.00$ -$

Shed constructed area -$ 247,500.00$ (247,500.00)$

Kitchen Equipments -$ -$ -$

Furnitures & Interior -$ -$ -$Franchise fees (Licence) -$ -$ -$

Transportation vehicles -$ -$ -$


1,200,000.00$ 1,447,500.00$ (247,500.00)$

Fast Food Franchise operations



15

After Tax Cash Flow analysis shows Cold Storage with more Present worth. But As FMCG and Cold Storage

projects have closer PW value; further sensitivity analysis and Risk profile analysis are required before

finalizing the project.



Flow

After Tax Cash

FlowPW of ATCF

k A B C=A-B D=-tC E=A+D F=E/(1+i)^k

0 (6,085,500.00)$ -$ -$ -$ (6,085,500.00)$ (6,085,500.00$

1 1,035,700.00$ 945,566.67$ 90,133.33$ (15,322.67)$ 1,020,377.33$ 907,809.0$2 1,035,700.00$ 220,066.67$ 815,633.33$ (138,657.67)$ 897,042.33$ 710,035.9$

3 1,035,700.00$ 220,066.67$ 815,633.33$ (138,657.67)$ 897,042.33$ 631,704.5$

4 1,035,700.00$ 220,066.67$ 815,633.33$ (138,657.67)$ 897,042.33$ 562,014.7$

5 1,035,700.00$ 220,066.67$ 815,633.33$ (138,657.67)$ 897,042.33$ 500,013.1$

6 1,035,700.00$ 220,066.67$ 815,633.33$ (138,657.67)$ 897,042.33$ 444,851.5$

7 1,035,700.00$ 57,400.00$ 978,300.00$ (166,311.00)$ 869,389.00$ 383,574.7$

8 1,035,700.00$ 57,400.00$ 978,300.00$ (166,311.00)$ 869,389.00$ 341,258.64$

9 1,035,700.00$ 57,400.00$ 978,300.00$ (166,311.00)$ 869,389.00$ 303,610.8$

10 1,035,700.00$ 57,400.00$ 978,300.00$ (166,311.00)$ 869,389.00$ 270,116.4$

11 1,035,700.00$ 54,000.00$ 981,700.00$ (166,889.00)$ 868,811.00$ 240,157.3$

12 1,035,700.00$ 54,000.00$ 981,700.00$ (166,889.00)$ 868,811.00$ 213,663.1$

13 1,035,700.00$ 54,000.00$ 981,700.00$ (166,889.00)$ 868,811.00$ 190,091.7$

14 1,035,700.00$ 54,000.00$ 981,700.00$ (166,889.00)$ 868,811.00$ 169,120.7$

15 1,035,700.00$ 54,000.00$ 981,700.00$ (166,889.00)$ 868,811.00$ 150,463.3$

15 3,000,000.00$ (540,000.00)$ 91,800.00$ 3,091,800.00$ 535,447.2$

468,433.1$




Land 3,000,000.00$ 3,000,000.00$ -$

Shed constructed area -$ 540,000.00$ (540,000.00)$

Cooling Equipments -$ -$ -$

Generator -$ -$ -$Furnitures -$ -$ -$

Handling Equipments -$ -$ -$

Transportation vehicles -$ -$ -$


3,000,000.00$ 3,540,000.00$ (540,000.00)$

Cold Storage

Summary (ATCF Analysis)

FMCG DistributionFast Food

FranchiseCold Storage

After Tax PW 426,872.07$ 377,759.21$ 468,433.10$

After Tax IRR % 13.59% 14.99% 13.71%



16

Sensitivity Analysis

FMCG Distributorship Project

$(3,500,000.00)

$(3,000,000.00)

$(2,500,000.00)

$(2,000,000.00)

$(1,500,000.00)

$(1,000,000.00)

$(500,000.00)

$-

$500,000.00

$1,000,000.00

$1,500,000.00

$2,000,000.00

$2,500,000.00

$3,000,000.00

$3,500,000.00

$4,000,000.00

$4,500,000.00

$5,000,000.00

A f e r - T a x P W

Input Value as % of Base Case

Spider diagram for FMCG Distributorship (for After Tax PW)

Profit

Sales

Initial Investments

Labor(Wages incl bonus)

Salvage Value

Fuel

Electricity

Phone bills

Stationaries

Purchase

10%

$6,796,800.00

$8,873,250.00

$390,000.00

$2,970,400.00

$36,000.00

$27,000.00

$4,500.00

$900.00

$5,760,000.00

30%

$12,744,000.00

$4,732,400.00

$208,000.00

$5,569,500.00

$19,200.00

$14,400.00

$2,400.00

$480.00

$10,800,000.00

Profit

Sales

Initial Investments


Salvage Value

Fuel

Electricity

Phone bills

Stationaries

Purchase

Afer-Tax PW

Tornado diagram for FMCG Distributorship (for After Tax PW)



17

Afer-Tax PW

Corresponding Input Value Output Value Percen

Input Variable Low Output Base Case High Output Low Base High Swing Swing^

Profit 10% 18% 30% (2,471,109.29)$ 426,872.07$ 4,105,079.18$ 6,576,188.47$ 49.8%

Sales 6,796,800.00$ 8,496,000.00$ 12,744,000.00$ (1,007,628.70)$ 426,872.07$ 4,013,124.01$ 5,020,752.71$ 29.1%

Ini ti al Investments 8,873,250.00$ 5,915,500.00$ $4,732,400.00 (2,530,877.93)$ 426,872.07$ $1,609,972.07 4,140,850.00$ 19.8%

Labor(Wages inc l bonus) 390,000.00$ 260,000.00$ $208,000.00 (292,592.05)$ 426,872.07$ $714,657.72 1,007,249.77$ 1.2%

Salvage Value 2,970,400.00$ 3,713,000.00$ 5,569,500.00$ 320,129.33$ 426,872.07$ 693,728.94$ 373,599.61$ 0.2%

Fuel 36,000.00$ 24,000.00$ $19,200.00 360,460.00$ 426,872.07$ $453,436.90 92,976.90$ 0.0%

Electricity 27,000.00$ 18,000.00$ $14,400.00 377,063.02$ 426,872.07$ $446,795.70 69,732.68$ 0.0%

Phone bi lls 4,500.00$ 3,000.00$ $2,400.00 418,570.56$ 426,872.07$ $430,192.68 11,622.12$ 0.0%

Stationaries 900.00$ 600.00$ $480.00 425,211.77$ 426,872.07$ $427,536.19 2,324.42$ 0.0%

Purchase 5,760,000.00$ 7,200,000.00$ 10,800,000.00$ 426,872.07$ 426,872.07$ 426,872.07$ -$ 0.0%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

22.00%

24.00%

26.00%

A f t e r - T a x I R R


Spider diagram for FMCG Distributorship (for IRR)

Profit

Sales

Initial Investments


Salvage Value

Fuel

Electricity

Phone bills

Stationaries

Purchase



18

Analysis result shows that Profit, Sales and Initial investments are significant factors affecting PW of this

project. Let us see the sensitivity and Break-even of these factors in this project.

10%

$6,796,800.00

$8,873,250.00

$390,000.00

$2,970,400.00

$36,000.00

$27,000.00

$4,500.00

$900.00

$5,760,000.00

30%

$12,744,000.00

$4,732,400.00

$208,000.00

$5,569,500.00

$19,200.00

$14,400.00

$2,400.00

$480.00

$10,800,000.00

2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% 22.00% 24.00% 26.00%

Profit

Sales

Initial Investments


Salvage Value

Fuel

Electricity

Phone bills

Stationaries

Purchase

After-Tax IRR

Tornado diagram for FMCG Distributorship (for IRR)

After-Tax IRRCorresponding Input Value Output Value Percen


Profit 10% 18% 30% 5.34% 13.59% 23.53% 18.18% 51.9%

Sales 6,796,800.00$ 8,496,000.00$ 12,744,000.00$ 9.57% 13.59% 23.28% 13.71% 29.5%

Initial Investments 8,873,250.00$ 5,915,500.00$ $4,732,400.00 7.34% 13.59% 17.78% 10.44% 17.1%

Labor(Wages incl bonus) 390,000.00$ 260,000.00$ $208,000.00 11.58% 13.59% 14.38% 2.80% 1.2%

Salvage Value 2,970,400.00$ 3,713,000.00$ 5,569,500.00$ 13.31% 13.59% 14.22% 0.91% 0.1%

Fuel 36,000.00$ 24,000.00$ $19,200.00 13.40% 13.59% 13.66% 0.26% 0.0%

Electricity 27,000.00$ 18,000.00$ $14,400.00 13.45% 13.59% 13.64% 0.19% 0.0%

Phone bil ls 4,500.00$ 3,000.00$ $2,400.00 13.56% 13.59% 13.59% 0.03% 0.0%Stationaries 900.00$ 600.00$ $480.00 13.58% 13.59% 13.59% 0.01% 0.0%

Purchase 5,760,000.00$ 7,200,000.00$ 10,800,000.00$ 13.59% 13.59% 13.59% 0.00% 0.0%



19

$(4,000,000.00)

$1,000,000.00

$6,000,000.00

$11,000,000.00

$16,000,000.00

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

A f e r - T a x P W

Profit

FMCG Distributorship Profit Vs After Tax PW

$(2,500,000.00)

$(2,000,000.00)

$(1,500,000.00)

$(1,000,000.00)

$(500,000.00)

$-

$500,000.00

$1,000,000.00

$1,500,000.00

A f e r - T a x P W

Sales

FMCG Distributorship Sales Vs After Tax PW



20




Profit 17.000%

Sales $ 7,680,000.00

Fast Food Franchise Outlet Project

$(8,000,000.00)

$(7,000,000.00)

$(6,000,000.00)

$(5,000,000.00)

$(4,000,000.00)

$(3,000,000.00)

$(2,000,000.00)

$(1,000,000.00)

$-

$1,000,000.00

$2,000,000.00

$3,000,000.00

$4,000,000.00

-100.0% 0.0% 100.0% 200.0% 300.0% 400.0% 500.0% 600.0%

A f e r - T a x P W


Spider Diagram for Fast Food Franchise (for PW)

Wastage

Profit

Sales

Initial Investments


Salvage Value

Electricity

Fuel

Phone bills

Stationaries

Purchase



21

50%

10%

$1,776,000.00

$4,000,000.00

$312,000.00

$960,000.00

$36,000.00

$36,000.00

$14,400.00

$900.00

$1,200,000.00

0%

100%

$3,330,000.00

$2,000,000.00

$166,400.00

$1,800,000.00

$19,200.00

$19,200.00

$7,680.00

$480.00

$2,250,000.00

Wastage

Profit

Sales

Initial Investments


Salvage Value

Electricity

Fuel

Phone bills

Stationaries

Purchase

Afer-Tax PW

Tornado Diagram for Fast Food Franchise (for After Tax PW)

Afer-Tax PW

Corresponding Input Value Output Value Perce

Input Variable Low Output Base Case High Output Low Base High Swing Swing

Wastage 50% 10% 0% (6,213,135.90)$ 405,710.42$ $1,233,066.21 7,446,202.11$ 55.9

Profit 10% 65% 100% (3,731,068.53)$ 405,710.42$ 1,853,583.05$ 5,584,651.58$ 31.4

Sales 1,776,000.00$ 2,220,000.00$ 3,330,000.00$ (396,824.70)$ 405,710.42$ 2,412,048.21$ 2,808,872.91$ 8.0

Ini tial Inves tments 4,000,000.00$ 2,456,000.00$ $2,000,000.00 (1,138,289.58)$ 405,710.42$ $861,710.42 2,000,000.00$ 4.0

Labor(Wages incl bonus) 312,000.00$ 208,000.00$ $166,400.00 (169,860.88)$ 405,710.42$ $635,938.94 805,799.82$ 0.7

Salvage Value 960,000.00$ 1,200,000.00$ 1,800,000.00$ 371,212.36$ 405,710.42$ 491,955.57$ 120,743.21$ 0.0

Electricity 36,000.00$ 24,000.00$ $19,200.00 339,298.35$ 405,710.42$ $432,275.25 92,976.90$ 0.0

Fuel 36,000.00$ 24,000.00$ $19,200.00 339,298.35$ 405,710.42$ $432,275.25 92,976.90$ 0.0

Phone bil ls 14,400.00$ 9,600.00$ $7,680.00 379,145.59$ 405,710.42$ $416,336.35 37,190.76$ 0.0

Stationaries 900.00$ 600.00$ $480.00 404,050.12$ 405,710.42$ $406,374.54 2,324.42$ 0.0

Purchase 1,200,000.00$ 1,500,000.00$ 2,250,000.00$ 405,710.42$ 405,710.42$ 405,710.42$ -$ 0.0



22

-25.00%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

-100.0% 0.0% 100.0% 200.0% 300.0% 400.0% 500.0% 600.0%



Spider Diagram for Fast Food Franchise (for IRR)

Wastage

Profit

Sales

Initial Investments


Salvage Value

Electricity

Fuel

Phone bills

Stationaries

Purchase



23

After-Tax IRR



Wastage 50% 10% 0% -16.39% 17.06% 21.91% 38.30% 51.8%

Profit 10% 65% 100% -4.99% 17.06% 25.60% 30.59% 33.1%

Sales 1,776,000.00$ 2,220,000.00$ 3,330,000.00$ 12.47% 17.06% 28.96% 16.48% 9.6%


Labor(Wages inc l bonus) 312,000.00$ 208,000.00$ $166,400.00 13.76% 17.06% 18.40% 4.64% 0.8%

Salvage Value 3,240,000.00$ 4,050,000.00$ 6,075,000.00$ 16.58% 17.06% 18.12% 1.54% 0.1%

Electricity 36,000.00$ 24,000.00$ $19,200.00 16.68% 17.06% 17.22% 0.54% 0.0%

Fuel 36,000.00$ 24,000.00$ $19,200.00 16.68% 17.06% 17.22% 0.54% 0.0%

Phone bills 14,400.00$ 9,600.00$ $7,680.00 16.91% 17.06% 17.12% 0.22% 0.0%

Stationaries 900.00$ 600.00$ $480.00 17.05% 17.06% 17.07% 0.01% 0.0%

Purchase 1,200,000.00$ 1,500,000.00$ 2,250,000.00$ 17.06% 17.06% 17.06% 0.00% 0.0%



24

Analysis result shows that Wastage, Profit and Sales are significant factors affecting PW of this project. Let us

see the sensitivity and Break-even of these factors in this project.

$(140,000,000.00)

$(120,000,000.00)

$(100,000,000.00)

$(80,000,000.00)

$(60,000,000.00)

$(40,000,000.00)

$(20,000,000.00)

$-

$20,000,000.00

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

A f e r - T a x P W

Wastage

Fast Food Franchise Wastage Vs After Tax PW

$(4,000,000.00)

$(3,000,000.00)

$(2,000,000.00)

$(1,000,000.00)

$-

$1,000,000.00

$2,000,000.00

$3,000,000.00

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

A f e r - T a x P W

Profit

Fast Food Franchise Profit Vs After Tax PW



25

$(2,000,000.00)

$(1,000,000.00)

$-

$1,000,000.00

$2,000,000.00

$3,000,000.00

$4,000,000.00

$5,000,000.00

$1,000,000.00 $1,500,000.00 $2,000,000.00 $2,500,000.00 $3,000,000.00 $3,500,000.00 $4,000,000.00

A f e r - T a x P W

Sales

Fast Food Franchise Sales Vs After Tax PW



Wastage 18.000%

Profit 51.000%

Sales 1,770,000.00$




26

Cold Storage Project

$(8,000,000.00)

$(7,000,000.00)

$(6,000,000.00)

$(5,000,000.00)$(4,000,000.00)

$(3,000,000.00)

$(2,000,000.00)

$(1,000,000.00)

$-

$1,000,000.00

$2,000,000.00

$3,000,000.00

$4,000,000.00

$5,000,000.00

$6,000,000.00

$7,000,000.00$8,000,000.00

$9,000,000.00

$10,000,000.00

A f e r - T a x P W


Spider Diagram for Cold Storage (for After Tax PW)

Profit

Sales

Wastage

Initial Investments


Salvage Value

Electricity

Fuel

Phone bills

Stationaries

Purchase

10%

$4,848,000.00

15%

$7,000,000.00

$243,750.00

$2,400,000.00

$54,000.00

$36,000.00

$1,800.00

$900.00

$3,840,000.00

100%

$9,090,000.00

5%

$5,000,000.00

$130,000.00

$4,500,000.00

$28,800.00

$19,200.00

$960.00

$480.00

$7,200,000.00

Profit

Sales

Wastage

Initial Investments


Salvage Value

Electricity

Fuel

Phone bills

Stationaries

Purchase

Afer-Tax PW

Tornado Diagram for Cold Storage (for After tax PW)



27

Afer-Tax PW



Profit 10% 40% 100% (6,843,603.20)$ 468,433.10$ 8,400,986.25$ 15,244,589.45$ 86.2%

Sales 4,848,000.00$ 6,060,000.00$ 9,090,000.00$ (926,220.43)$ 468,433.10$ 3,955,066.93$ 4,881,287.36$ 8.8%

Wastage 15% 10% 5% (1,094,203.91)$ 468,433.10$ $1,866,582.00 2,960,785.91$ 3.3%

Ini tial Investments 7,000,000.00$ 6,085,500.00$ $5,000,000.00 (446,066.90)$ 468,433.10$ $1,553,933.10 2,000,000.00$ 1.5%

Labor(Wages inc l bonus) 243,750.00$ 162,500.00$ $130,000.00 18,768.03$ 468,433.10$ $648,299.13 629,531.10$ 0.1%Salvage Value 2,400,000.00$ 3,000,000.00$ 4,500,000.00$ 382,187.95$ 468,433.10$ 684,045.97$ 301,858.02$ 0.0%

Electricity 54,000.00$ 36,000.00$ $28,800.00 368,814.99$ 468,433.10$ $508,280.35 139,465.36$ 0.0%

Fuel 36,000.00$ 24,000.00$ $19,200.00 402,021.03$ 468,433.10$ $494,997.93 92,976.90$ 0.0%

Phone bil ls 1,800.00$ 1,200.00$ $960.00 465,112.50$ 468,433.10$ $469,761.34 4,648.84$ 0.0%

Stationaries 900.00$ 600.00$ $480.00 466,772.80$ 468,433.10$ $469,097.22 2,324.42$ 0.0%

Purchase 3,840,000.00$ 4,800,000.00$ 7,200,000.00$ 468,433.10$ 468,433.10$ 468,433.10$ -$ 0.0%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

A f t e r - T a

x I R R


Spider Diagram for Cold Storage (for IRR)

Profit

Sales

Wastage

Initial Investments


Salvage Value

Electricity

Fuel

Phone bills

Stationaries

Purchase



28

Analysis result shows that Profit, Sales and Wastage are significant factors affecting PW of this project. Let us

see the sensitivity and Break-even of these factors in this project.

10%

$4,848,000.00

15%

$7,000,000.00

$243,750.00

$2,400,000.00

$54,000.00

$36,000.00

$1,800.00

$900.00

$3,840,000.00

100%

$9,090,000.00

5%

$5,000,000.00

$130,000.00

$4,500,000.00

$28,800.00

$19,200.00

$960.00

$480.00

$7,200,000.00

-15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00%

Profit

Sales

Wastage

Initial Investments


Salvage Value

Electricity

Fuel

Phone bills

Stationaries

Purchase

After-Tax IRR

Tornado Diagram for Cold Storage (for IRR)

After-Tax IRR

Corresponding Input Value Output Value Percent

Input Variable Low Output Base Case High Output Low Base High Swing Swing^2

Profit 10% 40% 100% -9.64% 13.71% 34.54% 44.18% 87.1%

Sales 4,848,000.00$ 6,060,000.00$ 9,090,000.00$ 9.77% 13.71% 23.09% 13.32% 7.9%

Wastage 15% 10% 5% 9.28% 13.71% 17.53% 8.25% 3.0%


Labor(Wages incl bonus) 243,750.00$ 162,500.00$ $130,000.00 12.45% 13.71% 14.21% 1.75% 0.1%

Salvage Value 2,400,000.00$ 3,000,000.00$ 4,500,000.00$ 13.49% 13.71% 14.22% 0.73% 0.0%

Electricity 54,000.00$ 36,000.00$ $28,800.00 13.43% 13.71% 13.82% 0.39% 0.0%

Fuel 36,000.00$ 24,000.00$ $19,200.00 13.52% 13.71% 13.78% 0.26% 0.0%

Phone bil ls 1,800.00$ 1,200.00$ $960.00 13.70% 13.71% 13.71% 0.01% 0.0%

Stationaries 900.00$ 600.00$ $480.00 13.70% 13.71% 13.71% 0.01% 0.0%

Purchase 3,840,000.00$ 4,800,000.00$ 7,200,000.00$ 13.71% 13.71% 13.71% 0.00% 0.0%



29

$(10,000,000.00)

$(8,000,000.00)

$(6,000,000.00)

$(4,000,000.00)

$(2,000,000.00)

$-

$2,000,000.00

$4,000,000.00

$6,000,000.00

$8,000,000.00

$10,000,000.00

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

A f e r - T a x P W

Profit

Cold Storage Profit Vs After Tax PW

$(4,000,000.00)

$(2,000,000.00)

$-

$2,000,000.00

$4,000,000.00

$6,000,000.00

$8,000,000.00

A f e r - T a x P W

Sales

Cold Storage Sales Vs After Tax PW



30

$(5,000,000.00)

$(4,000,000.00)

$(3,000,000.00)

$(2,000,000.00)

$(1,000,000.00)

$-

$1,000,000.00

$2,000,000.00

4% 9% 14% 19% 24%

A f e r - T a x P W

Wastage

Cold Storage Wastage Vs After Tax PW



Profit 40.000%

Sales 4,100,000.00$

Wastage 11.000%

Cold Storage



31

Probabilistic Risk Analysis

Based on the data collected, below are the distributions of each factor with parameters given. Also Risk profile

of each project is generated by using Monte Carlo Simulations.

FMCG Distributorship Project

Uncertain Variables Distribution Parameters

Initial Investments Uniform 4732400 8873250

Labor(Wages incl

bonus) Normal 260000 45500

Electricity Normal 18000 3150

Fuel Normal 24000 4200

Phone bills Normal 3000 525

Stationaries Normal 600 105

Purchase Normal 7200000 1260000

Profit Normal 18% 5%Sales Normal 8496000 1486800

Salvage Value Normal 5569500 649775

0

500

1000

1500

2000

2500

3000

Afer-Tax PW

F r e q u e n c y

FMCG Distributorship - Histogram

Mean (280,193.60)$

St. Dev. 2,460,749.14$

Mean St. Error 13,756.01$

Minimum (8,699,999.69)$

First Quartile (1,995,678.79)$

Median (338,968.36)$

Third Quartile 1,349,048.97$

Maximum 11,844,908.50$

Skewness 0.1555



32

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

C u m u l a t i v e P r o b a b i l i t y

Afer-Tax PW

FMCG Distributorship- Cumulative Chart

Percent Percentile

0% (8,699,999.69)$

5% (4,192,195.79)$

10% (3,384,774.10)$

15% (2,834,662.78)$

20% (2,371,883.20)$

25% (1,995,678.79)$30% (1,631,918.10)$

35% (1,283,745.60)$

40% (961,602.57)$

45% (643,803.82)$

50% (338,968.36)$

55% (26,553.71)$

60% 300,127.25$

65% 621,637.79$

70% 965,943.74$

75% 1,349,048.97$80% 1,764,892.48$

85% 2,270,135.43$

90% 2,893,681.50$

95% 3,875,461.31$

100% 11,844,908.50$



33

-10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00%

0

1000

2000

3000

4000

5000

6000

After-Tax IRR

F r e q u e n c y

FMCG Distributorship - Histogram

Mean 12.18%

St. Dev. 5.98%

Mean St. Error 0.03%

Minimum -7.06%

First Quarti le 8.00%

Median 11.65%

Third Quartile 15.84%

Maximum 42.71%

Skewness 0.5065



34

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

-10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00%


After-Tax IRR

FMCG Distributorship Cumulative Chart

Percent Percentile

0% -7.06%

5% 3.26%

10% 5.00%

15% 6.18%

20% 7.16%

25% 8.00%

30% 8.77%

35% 9.51%

40% 10.24%

45% 10.93%

50% 11.65%

55% 12.40%

60% 13.17%

65% 13.99%

70% 14.87%

75% 15.84%

80% 16.92%

85% 18.27%

90% 20.05%

95% 22.74%

100% 42.71%



35

Fast Food Franchise outlet Project

Uncertain Variables Distribution

Initial Investments Uniform 2,000,000.00$ 4,000,000.00$

Labor(Wages incl bonus) Normal 208,000.00$ 36,400.00$

Electricity Normal 24,000.00$ 4,200.00$Fuel Normal 24,000.00$ 4,200.00$

Phone bills Normal 9,600.00$ 1,680.00$

Stationaries Normal 600.00$ 105.00$

Purchase Normal 1,500,000.00$ 262,500.00$

Profit Normal 64% 23%

Wastage Normal 10% 13%

Sales Normal 2,220,000.00$ 388,500.00$

Salvage Value Normal 1,200,000.00$ 210,000.00$

Parameters

0

1000

2000

3000

4000

5000

6000

7000

Afer-Tax PW

F r e q u e n c y

Fast Food - Histogram

Mean (111,672.21)$

St. Dev. 1,686,809.27$


Minimum (13,782,045.41)$

First Quarti le (1,080,892.94)$

Median 15,523.10$

Third Quarti le 1,023,029.27$

Maximum 5,780,026.86$

Skewness -0.6730



36

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0


Afer-Tax PW

Fast Food - Cumulative Chart

Percent Percentile

0% (13,782,045.41)$

5% (3,046,754.84)$

10% (2,223,809.82)$

15% (1,739,120.80)$

20% (1,370,742.22)$

25% (1,080,892.94)$

30% (819,991.26)$

35% (588,814.06)$40% (371,919.01)$

45% (170,270.05)$

50% 15,523.10$

55% 206,414.53$

60% 409,630.92$

65% 607,667.74$

70% 806,199.30$

75% 1,023,029.27$

80% 1,268,357.07$

85% 1,533,888.44$90% 1,865,790.09$

95% 2,363,932.50$

100% 5,780,026.86$



37

Cold Storage Project

Uncertain Var iables Distribution

Initial Investments Uniform 5,000,000.00$ 7,000,000.00$

Labor(Wages incl bonus) Normal 162,500.00$ 28,437.50$

Electricity Normal 36,000.00$ 6,300.00$Fuel Normal 24,000.00$ 4,200.00$

Phone bills Normal 1,200.00$ 210.00$

Stationaries Normal 600.00$ 105.00$

Purchase Normal 4,800,000.00$ 840,000.00$

Profit Normal 40% 23%

Wastage Normal 10% 3%

Sales Normal 6,060,000.00$ 1,060,500.00$

Salvage Value Normal 3,000,000.00$ 525,000.00$

Parameters

0

2000

4000

6000

8000

10000

12000

14000

Afer-Tax PW

F r e q u e n c y

Cold Storage - Histogram

Mean (212,512.83)$

St. Dev. 5,102,515.50$


Minimum (51,512,295.20)$

First Quarti le (2,945,961.22)$Median 281,427.87$

Third Quarti le 3,161,496.71$

Maximum 16,987,256.00$

Skewness -0.9760



38

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0


Afer-Tax PW

Cold Storage - Cumulative Chart

Percent Percentile

0% (51,512,295.20)$

5% (9,127,625.45)$

10% (6,439,789.63)$

15% (4,936,809.23)$

20% (3,844,411.76)$

25% (2,945,961.22)$

30% (2,217,771.96)$

35% (1,509,964.52)$

40% (891,826.18)$

45% (272,137.78)$

50% 281,427.87$

55% 845,094.80$

60% 1,403,031.08$

65% 1,981,454.67$

70% 2,566,148.14$

75% 3,161,496.71$

80% 3,834,441.56$

85% 4,616,270.00$

90% 5,575,477.43$95% 6,998,267.94$

100% 16,987,256.00$



39

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%

0

1000

2000

3000

4000

5000

6000

7000

After-Tax IRR

F r e q u e n c y

Cold Storage- Histogram

Mean 29.00%

St. Dev. 7.77%


Minimum 5.85%

First Quartile 23.41%

Median 28.35%

Third Quartile 33.99%

Maximum 66.38%

Skewness 0.4216

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%


After-Tax IRR

Cold Storage - Cumulative Chart



40

Results for Probabilistic Analysis

Observation: All three Projects involve high risk factors in it.

Percent Percentile

0% 5.85%

5% 17.29%

10% 19.39%

15% 20.92%

20% 22.25%

25% 23.41%

30% 24.46%

35% 25.44%

40% 26.45%

45% 27.36%

50% 28.35%

55% 29.40%

60% 30.42%

65% 31.52%

70% 32.70%

75% 33.99%

80% 35.47%

85% 37.23%

90% 39.40%

95% 42.80%

100% 66.38%

Probabilistic Analysis Results


Mean (280,193.00)$


Prob (PW =< 0) ~ 55.000%


Mean (111,672.00)$


Prob (PW =< 0) ~ 45.000%


Mean (212,512.00)$


Prob (PW =< 0) ~ 45.000%


mean


mean


mean

FMCG distributorship


Cold Storage



41

What-If Analysis

Mr. X wants to minimize the risk by controlling the quality in 6 sigma level and with high class marketing

techniques, he wants to maintain the higher profit margins. Since he has considerable experience in Quality

assurance & Marketing of Food and Beverages, he believes that he could be able to control the quality and can

market the product much efficiently with no additional costs.

* As FMCG product pricing and Marketing are controlled by FMCG companies themselves, distributor has no

role in regulating them, hence considered only Fast Food & Cold Storage.

Cold Storage Project – Under What if Conditions

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

12.00%



Cold Storage - Spider Diagram under What if Condiation

Sales

Profit

Initial Investments


Salvage Value

Wastage

Electricity

Fuel

Phone bills

Stationaries

Purchase



42

$1,600,000.00

50%

$7,000,000.00

$243,750.00

$2,400,000.00

10%

$54,000.00

$36,000.00

$1,800.00

$900.00

$3,840,000.00

$3,000,000.00

100%

$5,000,000.00

$130,000.00

$4,500,000.00

5%

$28,800.00

$19,200.00

$960.00

$480.00

$7,200,000.00

1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00%

Sales

Profit

Initial Investments


Salvage Value

Wastage

Electricity

Fuel

Phone bills

Stationaries

Purchase

After-Tax IRR

Cold Storage - Tornado Diagram under What if Condiation

After-Tax IRR

Corresponding Input Value Output Value Percent

Input Variable Low Output Base Case High Output Low Base High Swing Swing^2

Sales $1,600,000.00 $2,000,000.00 $3,000,000.00 2.17% 4.54% 10.19% 8.02% 51.6%

Profit 50% 65% 100% 2.29% 4.54% 8.34% 6.05% 29.3%


Labor(Wages inc l bonus) 243,750.00$ 162,500.00$ $130,000.00 3.15% 4.54% 5.09% 1.94% 3.0%

Salvage Value 2,400,000.00$ 3,000,000.00$ 4,500,000.00$ 4.04% 4.54% 5.66% 1.62% 2.1%

Wastage 10% 8% 5% 3.93% 4.54% 5.13% 1.20% 1.2%

Electricity 54,000.00$ 36,000.00$ $28,800.00 4.24% 4.54% 4.67% 0.43% 0.1%

Fuel 36,000.00$ 24,000.00$ $19,200.00 4.34% 4.54% 4.63% 0.28% 0.1%

Phone bills 1,800.00$ 1,200.00$ $960.00 4.53% 4.54% 4.55% 0.01% 0.0%

Stationaries 900.00$ 600.00$ $480.00 4.54% 4.54% 4.55% 0.01% 0.0%

Purchase 3,840,000.00$ 4,800,000.00$ 7,200,000.00$ 4.54% 4.54% 4.54% 0.00% 0.0%



43

-10.00% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00%0

1000

2000

3000

4000

5000

6000

7000

8000

9000

After-Tax IRR

F r e q u e n c y

Cold Storage - Histogram Under What if Condition

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

-10.00% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00%


After-Tax IRR

Cold Storage - Cumulative Chart under What if Condition



44

Mean 26.24%

St. Dev. 7.65%


Minimum -8.16%


Median 25.88%Third Quartile 31.15%

Maximum 58.20%

Skewness 0.2624

Percent Percentile

0% -8.16%

5% 14.34%

10% 16.76%

15% 18.45%

20% 19.72%25% 20.90%

30% 21.97%

35% 23.02%

40% 24.00%

45% 24.96%

50% 25.88%

55% 26.85%

60% 27.84%

65% 28.88%

70% 29.95%

75% 31.15%

80% 32.51%

85% 34.16%

90% 36.23%

95% 39.47%

100% 58.20%



45

Fast Food Franchise Project- Under What if Condition

$(1,500,000.00)

$(1,000,000.00)

$(500,000.00)

$-

$500,000.00

$1,000,000.00

$1,500,000.00

$2,000,000.00

$2,500,000.00

$3,000,000.00

$3,500,000.00

$4,000,000.00

A f e r - T a x P W


Fast Food - Spider Diagram-Under What if Condition

Sales

Profit

Initial Investments


Wastage

Salvage Value

Electricity

Fuel

Phone bills

Stationaries

Purchase

$1,776,000.00

50.00%

$4,000,000.00

$312,000.00

10.00%

$3,240,000.00

$36,000.00

$36,000.00

$14,400.00

$900.00

$1,200,000.00

$3,330,000.00

100.00%

$2,000,000.00

$166,400.00

5.00%

$6,075,000.00

$19,200.00

$19,200.00

$7,680.00

$480.00

$2,250,000.00

Sales

Profit

Initial Investments


Wastage

Salvage Value

Electricity

Fuel

Phone bills

Stationaries

Purchase

Afer-Tax PW

Fast Food - Tornado Diagram-Under What if Condition



46

Afer-Tax PW



Sales $1,776,000.00 $2,220,000.00 $3,330,000.00 191,727.50$ 1,038,984.55$ 3,157,127.17$ 2,965,399.67$ 47.0%

Profit 50.00% 65.00% 100.00% 233,989.73$ 1,038,984.55$ 2,447,725.49$ 2,213,735.76$ 26.2%

Ini tial Investments 4,000,000.00$ 2,456,000.00$ $2,000,000.00 (505,015.45)$ 1,038,984.55$ $1,494,984.55 2,000,000.00$ 21.4%

Labor(Wages inc l bonus) 312,000.00$ 208,000.00$ $166,400.00 463,413.25$ 1,038,984.55$ $1,269,213.07 805,799.82$ 3.5%

Wastage 10.00% 7.50% 5.00% 815,374.87$ 1,038,984.55$ $1,250,825.29 435,450.42$ 1.0%Salvage Value 3,240,000.00$ 4,050,000.00$ 6,075,000.00$ 922,553.60$ 1,038,984.55$ 1,330,061.92$ 407,508.32$ 0.9%

Electricity 36,000.00$ 24,000.00$ $19,200.00 972,572.47$ 1,038,984.55$ $1,065,549.38 92,976.91$ 0.0%

Fuel 36,000.00$ 24,000.00$ $19,200.00 972,572.47$ 1,038,984.55$ $1,065,549.38 92,976.91$ 0.0%

Phone bil ls 14,400.00$ 9,600.00$ $7,680.00 1,012,419.72$ 1,038,984.55$ $1,049,610.48 37,190.76$ 0.0%

Stationaries 900.00$ 600.00$ $480.00 1,037,324.25$ 1,038,984.55$ $1,039,648.67 2,324.42$ 0.0%

Purchase 1,200,000.00$ 1,500,000.00$ 2,250,000.00$ 1,038,984.55$ 1,038,984.55$ 1,038,984.55$ -$ 0.0%

0

1000

2000

3000

4000

5000

6000

Afer-Tax PW

F r e q u e n c y

Fast Food - Histogram Under What if Condition

Mean 44,844.34$

St. Dev. 1,153,969.99$


Minimum (3,943,844.47)$First Quartile (751,472.84)$

Median 26,303.12$

Third Quartile 815,111.88$

Maximum 5,183,214.68$

Skewness 0.1009



47

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

C u m u l a t i v e P r o b a b i l i t

y

Afer-Tax PW

Fast Food - Cumulative Chart Under What if Condition

Percent Percentile

0% (3,943,844.47)$

5% (1,829,865.49)$

10% (1,434,424.82)$

15% (1,159,503.34)$

20% (939,897.82)$

25% (751,472.84)$

30% (578,909.63)$

35% (418,207.35)$

40% (267,822.12)$

45% (116,482.09)$

50% 26,303.12$

55% 173,067.70$

60% 322,052.64$

65% 480,969.01$

70% 647,760.74$

75% 815,111.88$

80% 1,015,626.66$

85% 1,245,762.89$

90% 1,534,579.88$

95% 1,974,531.39$

100% 5,183,214.68$



48

-15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 50.00%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

After-Tax IRR

F r e q u e n c y

Fast Food - Histogram under What if Condition

Mean 13.03%

St. Dev. 7.10%


Minimum -14.49%


Median 12.48%Third Quartile 17.40%

Maximum 49.35%

Skewness 0.4140



49

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

-15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 50.00%


After-Tax IRR

Fast Food - Cumulative Chart

under What if Condition

Percent Percentile

0% -14.49%

5% 2.29%

10% 4.43%

15% 5.90%

20% 7.04%

25% 8.08%

30% 9.06%

35% 9.93%

40% 10.79%

45% 11.62%

50% 12.48%

55% 13.35%

60% 14.26%

65% 15.23%

70% 16.27%

75% 17.40%

80% 18.78%

85% 20.34%

90% 22.39%

95% 25.57%

100% 49.35%



50

Results of What If Analysis:

Result: Cold Storage Project is become profitable and low risk

What If condition Results


Mean 5,027,304.00$


Prob (PW =< 0) ~ 2.000%


Mean 44,844.00$


Prob (PW =< 0) ~ 40.000%


Low Risk Project with large

mean

High Risk Project with low mea

Cold Storage



51

Recommendations & Conclusion

Cold Storage Project seems to be more profitable among three but with risk involved. If Mr X is Riskseeking personality, he can opt for Cold Storage Project as is, provided he could be able to achieve

the break-even atleast to avoid loss of capital.

If Mr. X could be able control the Quality at 6-Sigma level and could Market the product better way,

Cold Storage product is the one with Less Risk and High PW value. Hence ha can opt for Cold Storage

Project under this condition.

***End of the Report***

y ie5003 term paper

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