You are on page 1of 24

FEASIBILITY STUDY RESULTS 4.

0 FINANCIAL AND ECONOMIC ANALYSIS

57

Financial and economic analysis was undertaken to determine the profitability of various production/marketing options which were found technically sound. Financial analysis was undertaken in two levels:

Farmer level The farmer-members of ALYANSA shall be the input providers of fresh ilang-ilang flowers for the ilang-ilang essential oil extraction plant to be operated by the new organization who will take charge of the enterprise..

The profitability of planting ilang-ilang has to be attractive to the input providers (the farmer-members) compared to other competing land uses for them to be encouraged in switching from one land use to ilang-ilang production..

Households of primary-cooperative/association members of ALYANSA shall be the input providers of sampaguita flowers for garlands making to be managed by the primary cooperative/association which has jurisdiction over the targeted barangay.

As a household home garden, sampaguita production must be able to provide additional income to the household.
• 

ALYANSA/Member Cooperative(s)/Association The ALYANSA or a new member cooperative will operate and manage the essential oil production and marketing.

The profitability of the proposed enterprise has to be attractive for the organization.

The primary cooperative/association who has jurisdiction over the targeted barangay shall manage the production and marketing of the garlands out of the sampaguita flowers produced by individual households.

The profitability of the proposed enterprise has to be attractive for the organization.

FINANCIAL AND ECONOMIC ANALYSIS

FEASIBILITY STUDY RESULTS 4.1 Financial Profitability of Ilang-ilang Fresh Flowers Production 4.1.1

58

Ilang-ilang Fresh Flowers Production (Farm Level)

Ilang-ilang production entails plantation establishment, care and maintenance of the trees and harvesting activities. Given the recommended cultural management practices for ilang-ilang production in Carranglan, the labor cost, material input costs and other cost items were computed.

Ilang-ilang trees start to bear flowers on the 3rd year from year of planting (Table 4). Production gradually increases until the 8th year. A 15-year yield projection was made.

A projected income statement was prepared to evaluate the profitability of ilang-ilang production at the farm level (on a per tree and per hectare basis).
 

Tables 16 & 17 present the summary of the projection. The details are shown in Appendix Tables 1 & 2.

Table 16. Financial Analysis per Tree, Ilang-ilang Fresh Flower Production YEAR 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 GROSS SALES (P) 0 0 150 300 500 750 1,050 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 COST OF PRODUCTION (P) 90 39 58 76 104 125 165 241 247 241 247 241 247 241 247 NET INCOME (P) (90) (39) 92 224 396 625 885 1,559 1,553 1,559 1,553 1,559 1,553 1,559 1,553

FINANCIAL AND ECONOMIC ANALYSIS

000 360.072 32.172 49. The FIRR result of 109% supports this conclusion.000 360.000 100.628 4.172 49.000 360.008 311.000 360.000 is incurred on a per hectare basis. Ilang-ilang Fresh Flower Production YEAR 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 GROSS SALES (P) 0 0 30.828 310.079 7.000 150.   Table17.   FINANCIAL AND ECONOMIC ANALYSIS .828.  A discount factor of 20% (the current commercial borrowing rate) was used in computing the NPV.172 49.348 to as high as P311. During the plantation establishment years (Year 1 & 2).372 NET INCOME (P) (18.000 210.172 20.372 48.628 311.000 COST OF PRODUCTION (P) 18. a net loss of approximately P26.652 15.348 44.928 177.828 79.172 49. As can be seen in the above table.508 311.992 48.828 310.000 60.2 Financial Internal Rate of Return (FIRR) and Net Present Value (NPV)  Discounted measures of project worth.000 360.079) (7. Both measures show high profits in ilang-ilang production over a 15-year period.372 48.559 when the ilang-ilang tree is on its 8th year onwards.822 11. FIRR and NPV were also computed to determine the profitability of operation within a 15-year period.892 25.828 310.000 360.628 311. The very large and positive NPV at 20% discount factor means the earning capacity of the enterprise is way above the commercial rate of borrowing. ilang-ilang production is very profitable as shown by the annual net income ranging from P18.000 360.828 310.492 48. Financial Analysis per Hectare.FEASIBILITY STUDY RESULTS  59 On a per tree basis.822) 18.1.108 124. a farmer will have an annual net income of P1.000 360. The results are shown in Tables 18 & 19.

372 = = NET CASHFLOW (18.492 48.f.372 48.000 8 360.828 310.559 1.172 49.000 4 60.000 15 360.172 49.348 44.628 311.079 7.000 12 360.f.800 9 1. Ilang-ilang Fresh Flower Production YEAR CASH INFLOW CASH OUTFLOW 18.108 124.559 1.508 311.000 6 150.800 15 1.000 5 100.340 109% 1 0 2 0 3 150 4 300 5 500 6 750 7 1. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) Table 19.000 7 210.000 NET PRESENT VALUE at 20% d.892 25.800 NET PRESENT VALUE at 20% d.828 79.822 11.553 2.559 1.553 1.090 109% 1 0 2 0 3 30.828 310.000 13 360.000 10 360.008 311.928 177. Ilang-ilang Fresh Flower Production YEAR CASH INFLOW CASH OUTFLOW 90 39 58 76 104 125 165 241 247 241 247 241 247 241 247 = = NET CASHFLOW (90) (39) 92 224 396 625 885 1.628 311. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) FINANCIAL AND ECONOMIC ANALYSIS .079) (7.800 10 1.828 310.800 14 1.828 310.000 11 360.559 1. Net Present Value and Financial Internal Rate of Return per Hectare.172 49.172 20.000 9 360.050 8 1.FEASIBILITY STUDY RESULTS 60 Table 18.553 1.800 13 1.172 49.072 32.553 1.372 48.800 11 1. Net Present Value and Financial Internal Rate of Return per Tree.652 15.822) 18.992 48.628 468.800 12 1.000 14 360.

  On a per tree basis.f. the results are shown in Tables 20 – 23. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 80% Decrease in price of output/unit 0% Cost overran 0% FINANCIAL AND ECONOMIC ANALYSIS . Sensitivity Analysis (% Decrease in Yield). and a combination of these variables. Ilang-ilang Fresh Flower Production Per Tree YEAR CASH INFLOW CASH OUTFLOW 90 39 58 76 104 125 165 241 247 241 247 241 247 241 247 = = NET CASHFLOW (90) (39) (28) (16) (4) 25 45 119 113 119 113 119 113 119 113 17 22% 1 0 2 0 3 30 4 60 5 100 6 150 7 210 8 360 9 360 10 360 11 360 12 360 13 360 14 360 15 360 NET PRESENT VALUE at 20% d. Table 20. unforeseen increases in the cost of production.FEASIBILITY STUDY RESULTS 4.1.3  61 Sensitivity Analysis A sensitivity analysis was done to determine the ability of the enterprise to withstand risks from decreases in the yield and price of output. it can be seen that the proposed project can withstand as much as 80% reduction in yield per tree of ilang-ilang flowers assuming that the cost of production does not increase. In Table 20.

Table 21. Results show that the proposed project on a per tree basis can withstand an increase in the cost of production (cost overrun) of as high as 370%.   Based on the above changes the proposed project can withstand various combinations of these above-stated risks. changes in NPV and FIRR were evaluated assuming cost overrun (i. It can withstand 80% reduction in the price of fresh flowers. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 0% Decrease in price of output/unit 80% Cost overran 0%  In Table 22. Sensitivity Analysis (% Decrease inPrice/Kg Yield). increase in the cost of production). This is shown in Table 21.f.FEASIBILITY STUDY RESULTS  62 The same conclusion is reached if the price per kilogram of fresh flowers is reduced.e. FINANCIAL AND ECONOMIC ANALYSIS . Ilang-ilang Fresh Flower Production Per Tree YEAR CASH INFLOW CASH OUTFLOW 90 39 58 76 104 125 165 241 247 241 247 241 247 241 247 = = 17 22% NET CASHFLOW (90) (39) (28) (16) (4) 25 45 119 113 119 113 119 113 119 113 1 0 2 0 3 30 4 60 5 100 6 150 7 210 8 360 9 360 10 360 11 360 12 360 13 360 14 360 15 360 NET PRESENT VALUE at 20% d.

This means that even if the yield is just 10% of the estimated yield per hectare.   • The ability to withstand decreases in yield is shown in Table 23.800 9 1.160 1.163 1. • Result shows that the proposed project can withstand even if cost of production increased by 390%.800 14 1. Ilang-ilang Fresh Flower Production Per Tree YEAR CASH INFLOW CASH OUTFLOW 425 184 274 357 491 589 775 1.800 15 1. The resulting NPV is also positive indicating the same results as that of the computed FIRR.132 1.132 1. assuming that other factors do not change.FEASIBILITY STUDY RESULTS Table 22.  • In Table 24 changes in NPV and FIRR were evaluated assuming an increase in cost of production.132 1.800 NET PRESENT VALUE at 20% d.800 11 1. the FIRR of fresh flowers production per hectare is still above the borrowing rate of 20%.160 = = 255 25% NET CASHFLOW (425) (184) (124) (57) 9 161 275 668 637 668 640 668 640 668 640 63 1 0 2 0 3 150 4 300 5 500 6 750 7 1. Results show that the proposed project can withstand a decrease of 90% in the projected yield per hectare.800 10 1.050 8 1. the results of the sensitivity analysis are discussed and shown in Tables 23 & 24 below. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 0% Decrease in price of output/unit 0% Cost overran 370% On a per hectare basis.800 12 1. Sensitivity Analysis (% Cost Overrun).132 1.160 1.f.800 13 1. FINANCIAL AND ECONOMIC ANALYSIS .

000 15 360.000 NET PRESENT VALUE at 20% d.778 8.000 13 360.462) 24.862 240.000 9 360.000 12 36. Ilang-ilang Fresh Flower Production Per Hectare YEAR CASH INFLOW CASH OUTFLOW 90.532 13.148 23.079 7.139 113.862 246.FEASIBILITY STUDY RESULTS Table 23.000 6 150.232) (992) 4.000 12 360.000 6 15.362 164.000 10 36.262 75.000 5 10.468 22.f.822 8.682 9.268 23. Sensitivity Analysis (% Cost Overrun).000 5 100.079) (7.000 15 36.139 1 0 2 0 3 30.000 14 36.139 113.000 9 36.079 22% NET CASHFLOW (90.862 246.139 113.862) (4.f.539 119.639 45.000 7 21.2 Financial Profitability of Ilang-ilang Essential Oil Production FINANCIAL AND ECONOMIC ANALYSIS . (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 0% Decrease in price of output 0% Cost overran 400% 4.862 247.862 104.462 240.000 11 360.532 13.732 12.000 NET PRESENT VALUE at 20% d.112 58.268 64 1 0 2 0 3 3.000 11 36.962 240.468 22.000 8 360.139 119.992 10.139 112.000 4 60.798 23.000 14 360.000 8 36. Sensitivity Analysis (% Decrease in Yield).732 = = 2. Ilang-ilang Fresh Flower Production Per Hectare YEAR CASH INFLOW CASH OUTFLOW 18.835 22% NET CASHFLOW (18.682) (3.852 12.232 10.468 22.862 = = 17.732 12.396) (39.822) (5.000 4 6.000 10 360.000 13 36.532 13.039 119.112) (28.139 119.000 7 210.532 13.268 23.462 125.202 12.396 39.862 246. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 90% Decrease in price of output 0% Cost overran 0% Table 24.222 12.262) (15.468 22.862 240.

499.060. Table 25.484 970.200 3. Financial Analysis.200 3.2.1  Net Income Essential oil production starts on the 3rd year after the ALYANSA members have established ilang-ilang plantation.200 3.786 620.682 1.438.499.200 3.518 2.682 1.438.682 NET INCOME (P) 0 0 31.682 1.518 2.682 1.000 1.458.060.060.389.499.414 351.  Net income from operation gradually increases from the 3rd year onwards.013 260.200 TOTAL EXPENSES (P) 0 0 260.438.518  The oil extraction operation is highly dependent on the ability of the members of produce ilang-ilang fresh flowers which is the basic input of the operation.438.438.2  Using the current commercial rate of borrowing (20%) as the discount factor.499.499. Financial Internal Rate of Return (FIRR) and Net Present Value (NPV) 4.548 1.682 1.518 2. 4.652 2.682 1. the net cash flow was discounted to determine the net present value of the enterprise.499. FINANCIAL AND ECONOMIC ANALYSIS .499.518 2.106 1.894 651.000 2.516 487.200 3.518 2. The profitability of operation is shown in Table 25.200 3.438.060.060.682 1. This is the year the ilang-ilang trees start to bear flowers. Essential Oil Production YEAR 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 GROSS SALES (P) 0 0 291.518 2.600 583.060.060.200 3.041.518 2.060.FEASIBILITY STUDY RESULTS 65 The new cooperative member of ALYANSA will directly manage the production and marketing of essential oil production.499.438.587 322.438.2.200 3.200 972.

438.060.438.200 3.060.FEASIBILITY STUDY RESULTS  66 In addition.516 487.200 10 3.419M was computed using 20% discount factor.682 1.682 NET CASHFLOW 0 (430.518 2. Table 26.060.499.438.682 1.652 2. FINANCIAL AND ECONOMIC ANALYSIS .499.438.041.682 1. FIRR was computed to determine the earning capacity of the said enterprise.200 14 3. It means that even if the price per liter of essential oil is only P2. Both of the positive NPV and FIRR are higher than the commercial borrowing rate of 20%. prices of essential oil and increases in the cost of production have been altered to find out the extent of flexibility of essential oil production given the above variable factors.438.f.29.536 89% 291.000.200 13 3.106 1. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) = = Changes in the assumed quantity of essential oil produced.518 2.438.000 1.418.518 2.499.200 15 3.518 2.060.587 322.682 1.    The results are shown in Tables 27 .200 3.499. Essential Oil Production YEAR 1 2 3 4 5 6 7 8 9 CASH INFLOW 0 0 CASH OUTFLOW 0 430.438.060.060.200 12 3.013 260.200 11 3.499.499.000) 31.484 970.438.682 1. the operation is still profitable given the 20% borrowing rate.682 1.499. The profitability of the essential oil production and marketing was tested.499.548 1.060.000 2.414 351.518 3.518 2.458.389. Table 26 shows the FIRR and NPV of essential oil production.060.000 260.786 620.    An NPV of approximately P3. It can be seen in Tables 27 & 28 that the proposed essential oil production can withstand a yield reduction of up to 80% or a 69% reduction in price of output.518 2. At this rate. Net Present Value and Financial Internal Rate of Return.600 583. The FIRR computed is 89%. This suggests that essential oil extraction given the technical assumptions proposed is highly profitable.200 972.682 1.518 2.894 651.200 NET PRESENT VALUE at 20% d.

968 549.023. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 80% Decrease in price of output 0% Cost overran 0% Table 28.440 1.000 13 864.f.520 89.339.760 315. Sensitivity Analysis (% Decrease in Price/Liter Yield).032 314.968 549.200 NET PRESENT VALUE at 20% d.200 8 1.200 15 1.200 5 372.464 231.000 4 144.023.968 549.000 14 864.000 10 864.000 15 864.920 310.000) (139.968 = = 1. Essential Oil Production YEAR CASH INFLOW CASH OUTFLOW 0 430.440 1.000 7 781.032 314.328) 35.200 12 1.000 NET PRESENT VALUE at 20% d.339.339.000 6 360.000 7 504.360 315.032 314.200 10 1.760 315.760 315.032 67 1 0 2 0 3 72.339.000 12 864.032 314.760 315.240 336.080 153.762 20% NET CASHFLOW 0 (430.000 250.000 11 864.968 549.440 1.023.200 9 1.550 20% NET CASHFLOW 0 (430.023.760 315.968 549.200 14 1.023.760 315.440 = = 4.352 314.320) (87.FEASIBILITY STUDY RESULTS Table 27.000 211.023.023.968 549.000 468.023.f.760 1 0 2 0 3 111.200 626.000 5 240.440 1. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 0% Decrease in price of output 69% Cost overran 0%  FINANCIAL AND ECONOMIC ANALYSIS .328 204.800 154.000 6 558.339.968 549.040) 36.440 1.440 1.464) (87.480 270.000 8 864.339.339.200 11 1. Essential Oil Production YEAR CASH INFLOW CASH OUTFLOW 0 430.000) (139.648 549.440 1.032 314.840 1. Sensitivity Analysis (% Decrease in Yield).600 4 223.000 9 864.000 89.760 315.032 314.339.032 314.200 13 1.920 350.

3  An area of 30 m2 with 25 sampaguita shrubs is proposed per household of primary cooperative or association member of ALYANSA in areas along the national highway. (Table 29).319.728 3. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 0% Decrease in price of output 0% Cost overran 270% competition of organic based ilang ilang essential oil with synthetic oil will pose competition to synthetic oil.786.272 533.200) 67.000 14 4.340 2.000 5 1.320.320.200.272 58.728 3.FEASIBILITY STUDY RESULTS Table 29.786.728 3.272 533.272 533.000 15 4.000) (298.320.692 533.800. Sensitivity Analysis (% Cost Overrrun).728 3.000 12 4.320.308 3.728 3.272 533.320.728 = = NET CASHFLOW 0 (430.888 1.320. The technical assumptions in sampaguita production (Table 6) shows an average flower production of 15 liters/shrub/year except on the first year where only 5 liters/shrub/year is assumed.  In addition.200 1.000 NET PRESENT VALUE at 20% d.404 931. Profitability of Sampaguita Fresh Flower Home Garden 4.  In terms of cost overran (or increases in the cost of production).728 3.000 11 4. these households are expected to sell their sampaguita flowers to their primary cooperative or association which in turn strings these flowers into garlands and distribute them to the market.786.000 9 4.896 22% 68 1 0 2 0 3 360. the proposed project can with stand a 270% increase in cost.732.000 10 4.000 13 4.786.272 533.272 533.786.000 8 4.000 7 2.786.786.  FINANCIAL AND ECONOMIC ANALYSIS .888) (43.000 6 1. Essential Oil Production YEAR CASH INFLOW CASH OUTFLOW 0 430.000 4 720.728 3.000 658.f.320.272 533.243.404) (211.520.786.660 200.320.

Financial Analysis. Table 30.250 11.718 5.  The computed net income per household is shown in Table 30.585 was computed.607 5.532 5.718 4.000 can be realized by the household for their 25 shrubs of sampaguita.250 11.3.718 5.532 5.250 11.718 5.718 5.250 COST OF PRODUCTION (P) 8.532 5.532 5. the net income from operation also gradually increases.718 5.532 5.250 11.532 NET INCOME (P) (5.532 5.532 5. Household Level.643 5.532 5.532 5.3. YEAR 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 GROSS SALES (P) 3.250 11.718 5. FINANCIAL AND ECONOMIC ANALYSIS .f.  As shown in the table below.199) 5.718 5.FEASIBILITY STUDY RESULTS 4. FIRR was computed to determine the earning capacity of the said enterprise. In addition.532 5.532 5. Sampaguita Fresh Flower Production.250 11.750 11.250 11.) of P17. an annual net income of approximately P6.250 11. Table 31 shows the FIRR and NPV of sampaguita flower production.250 11.718 5.250 11.1  69 Net Income In as much that sampaguita seedlings start to bear flowers on the 6th month after planting and that production gradually increases until the 2nd year.532 5.250 11.718 5.   A positive NPV (at 20% d.2  Financial Internal Rate of Return (FIRR) and Net Present Value (NPV) Using the current commercial rate of borrowing (20%) as the discount factor. the net cash flow was discounted to determine the net present value of the enterprise.250 11.949 5.718 5.718 5.718 5.250 11.

585 109% 1 3.718 5.718 5.250 15 11.607 5. Results of the tests show that:   The sampaguita home garden operation can withstand 37% yield reduction.199) 5. Net Present Value and Financial Internal Rate of Return.718 5.532 5.3. FINANCIAL AND ECONOMIC ANALYSIS .718 5. Sampaguita Fresh Flower Production.532 5.250 5 11. Both discounted measures indicate that sampaguita production on a home garden scale is very profitable no matter how small the size is.718 5.250 8 11.532 5.250 9 11.250 7 11.532 = = NET CASHFLOW (5.718 5. selling price of sampaguita fresh flowers and the cost of production.532 5.250 12 11.532 5.250 3 11.750 2 11. This means sampaguita home gardens will still be profitable even if the yield per shrub per year is decreased (Table 32) or the price per unit of fresh sampaguita flowers is reduced (Table 33). Table 31.532 5.250 NET PRESENT VALUE at 20% d.532 5.718 5.532 5.718 17.250 4 11.250 11 11.532 5.3  Sensitivity Analysis The sampaguita home garden was also subjected to sensitivity test to determine the extent of flexibility of operation given the variability of yield.718 5.949 5. YEAR CASH INFLOW CASH OUTFLOW 8.250 10 11.250 6 11.643 5.718 5.f.250 13 11.718 5.718 5. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) 4. Yield reduction and output price reduction are sources of variation in sampaguita production.532 5.718 5.532 5.532 5.FEASIBILITY STUDY RESULTS 70   An FIRR of 109% was computed.250 14 11.

949 5.532 5.088 14 7.53 2 = = N T E CS F W A H LO (6.088 5 7.f. Household Level.556 1.53 2 5.556 1.088 15 7.443 1.97 5 7 6.443 1.532 5.088 4 7.94 9 5.53 2 5.532 5.088 6 7. YEAR CASH INFLOW CASH OUTFLOW 8.532 5.443 1.443 1.088 11 7.97 5 5 6.363 2 7.556 1.97 5 6 6.443 1.088 8 7. ) F A C L IN E N L R T O R T R (FIR ) IN N IA T R A AE F EU N R S N IT IT A A S E S IV Y N LY IS R eductio in yield n 38% D ecre ase in output price/unit 0% C overran ost 0% Table 33.443 1. ensitivity A lysis (D na ecrea in Y se ield).532 5.53 2 5.FEASIBILITY STUDY RESULTS T able 32 S .53 2 5.556 1.556 1.f.53 2 5.97 5 8 6.088 NET PRESENT VALUE at 20% d.53 2 5.532 5.556 1.368 1.624 ) 1.556 1.556 1.443 1.088 7 7. Sensitivity Analysis )% Decrease in the Price/unit of Output) Fresh Flower Production.97 5 1 4 6.53 2 5.443 1.443 1.481 1.443 1.532 5.443 (2 7) 20 % 71 1 2.088 12 7.97 5 9 6.556 1.443 1.556 1.587) 1.607 5.532 5. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 0% Decrease in output price/unit 37% Cost overran 0% FINANCIAL AND ECONOMIC ANALYSIS .97 5 N T P E E T V LU a 20%d (P E RS N A E t .088 13 7.532 5.556 1.556 1.556 436 22% 1 2.53 2 5.53 2 5.32 5 2 6.088 3 7.088 9 7.97 5 3 6.532 5.97 5 1 2 6.53 2 5.532 5.97 5 1 5 6.97 5 1 0 6.97 5 1 1 6.60 7 5.532 5.53 2 5.443 1. S paguita Fresh F er P am low rodu n ctio Y A E R C S A H IN FLO W C S A H O T O U FL W 8.97 5 1 3 6.532 = = NET CASHFLOW (6.97 5 4 6.53 2 5.088 10 7.

price decrease and cost overrun.851 8. Sampaguita Fresh Flower Production YEAR CASH INFLOW CASH OUTFLOW 14.250 11 11.250 12 11.851 8.399 327 21% 1 3.399 2.250 NET PRESENT VALUE at 20% d.279 2.851 = = NET CASHFLOW (10.399 2.319 8.250 8 11. Table 34.851 8.851 8.399 2. Sensitivity Analysis (% Cost Overrun)).399 2.399 2.851 8.851 8.250 14 11.399 2.250 7 11.399 2. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 0% Decrease in output price/unit 0% Cost overran 60%  Combining decreases in yield/output.851 8.399 2.851 8.250 4 11. FINANCIAL AND ECONOMIC ANALYSIS .250 13 11.399 2. the sampaguita home garden can withstand approximately 60% increase in the cost of production (Table 34).851 8. the proposed sampaguita home garden can withstand a combination of 15% yield decrease and output price decrease.399 2.750 2 11.250 3 11.250 5 11. and 16% increase in the cost of production (Table 35).569) 2.250 10 11.399 2.971 8.FEASIBILITY STUDY RESULTS  72 In terms of its ability to withstand increases in the cost of production.851 8.851 8.250 9 11.250 6 11.851 8.250 15 11.f.399 2.

417 6.FEASIBILITY STUDY RESULTS Table 35. an attractive opportunity for members to engage in garlands making.128 10 8.4.4  Profitability of Sampaguita Garlands On the primary cooperative/association level.417 6.128 12 8.417 6.128 11 8.128 9 8. Sensitivity Analysis (Combined Effect).711 1.624 1.128 5 8.709 2 8.711 1.417 6.711 1. Sampaguita Fresh Flower Production YEAR CASH INFLOW CASH OUTFLOW 10.1  Net Income On the basis of the technical assumption in garlands making and marketing.417 6. the profitability of garlands making and marketing was also evaluated.417 6.711 1. The result is shown in Table 36. the net income on the association level was computed. Results show a very high net income for the primary cooperative or association if they engage in garlands making and marketing.417 = = NET CASHFLOW (7.417 6.  FINANCIAL AND ECONOMIC ANALYSIS .417 6.711 1.381 6.f.711 1. 4.128 13 8.672) 1.128 8 8.711 1.711 1.711 1.417 6.128 4 8.504 6.417 6.417 6.417 6.128 6 8.711 121 20% 73 1 2.711 1.711 1.128 NET PRESENT VALUE at 20% d. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 15% Decrease in output price/unit 15% Cost overran 16% 4.128 15 8.711 1.128 3 8.128 14 8.128 7 8.

500 862. Both discounted measures indicate that. if the cooperative or association will engage in garlands production and marketing.000 NET PRESENT VALUE at 20% d. Net Present Value and Financial Internal Rate of Return.250.250.500 387.f.500 862.000 15 1. the net cash flow was discounted to determine the net present value of garlands production and marketing.000 10 1. Garlands Production YEAR CASH INFLOW CASH OUTFLOW 23.000 4 1.500 862.250.500 862. is dependent on the success of sampaguita home gardening being operated by household members.000 14 1. A very high FIRR was computed.958 287.000 9 1.000 12 1.FEASIBILITY STUDY RESULTS  74 This high net income.500 = = NET CASHFLOW (23.250.500 862. a modest profit awaits them considering the potential market for garlands in nearby provinces.500 387. Table 36.500 387. Table 36 above shows the FIRR and NPV of sampaguita garlands production and marketing.500 862.667 2 1. In addition. however.000 6 1.250. FINANCIAL AND ECONOMIC ANALYSIS .) was computed.500 862.000 13 1.000 8 1.250.250.f.500 387.500 862.500 1.000 5 1.500 862.500 862.500 387.500 387.596.     A very high positive NPV (at 20% d.500 862.500 862.500 387.000 3 1.250.000 7 1.250.958) 129.500 387.500 862. FIRR was computed to determine the earning capacity of the said enterprise.250.500 387.500 387.468 678% 0 1 416.167 387.250.500 387.500 387.250. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) 4.500 387.250. being the providers of sampaguita blooms (flowers).4.500 862.000 11 1.2  Financial Internal Rate of Return (FIRR) and Net Present Value (NPV) Using the current commercial rate of borrowing (20%) as the discount factor.250.

500 12. Yield reduction and output price reduction are sources of variation.500 862.000 5 875.000 15 875. Result of the test shows that:   The sampaguita garlands production and marketing can withstand 30% decrease in price per unit of sampaguita garlands (Table 37) or 30% yield reduction or price reduction (Table 38).000 11 875. selling price of sampaguita garlands and the cost of production and marketing of garlands.4.  Table 37.000 8 875.500 51.167 12.500 862.500 862.500 862.000 NET PRESENT VALUE at 20% d.500 12.500 12.000 10 875.500 12.500 12. YEAR CASH INFLOW CASH OUTFLOW 23.500 12.000 13 875.500 = = NET CASHFLOW (23.500 862.958) 4.500 12.500 862. This means that the cooperative still has positive net profit even if the price of garlands is reduced by 30% or its level of operation is just 70% of the planned scale.3  75 Sensitivity Analysis The proposed sampaguita garlands production and marketing on the cooperative or association level was subjected to sensitivity test to determine how flexible the operation can be given the variability of market.499 42% 0 1 291.500 12.500 862.500 12.000 3 875.000 4 875.500 862.500 862. Sensitivity Analysis (% Decrease in Price/unit of Output).500 12.500 862.000 14 875.f.000 7 875.000 9 875.500 12.500 12.958 287.000 6 875.667 2 875.500 862.FEASIBILITY STUDY RESULTS 4. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 30% Decrease in price of output 0% Cost overran 0% FINANCIAL AND ECONOMIC ANALYSIS .500 12.500 862.500 862. Barangay Association/Cooperative Level.500 862.000 12 875.

500 862. Sensitivity Analysis (% Decrease in Output).000 12 875.500 12.000 4 875.500 12.500 12.500 862.000 11 875.500 862.f. the operation of the cooperative or association is still profitable given a zero change in the commercial borrowing rate of 20%. YEAR CASH INFLOW CASH OUTFLOW 23.FEASIBILITY STUDY RESULTS Table 38.500 = = NET CASHFLOW (23. the result of the sensitivity test showed that:  Even if the cost of production and marketing of sampaguita garlands increased by 44%.500 12. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 0% Decrease in price of output 30% Cost overran 0% In terms of the ability of the cooperative to cope up with increases in the cost of garland production and marketing. Barangay Association/Cooperative Level.000 9 875.000 13 875.500 862.500 12.500 862.500 12.500 862.500 862.500 862.000 NET PRESENT VALUE at 20% d.in the price and level of production of garlands (Table 39).500 862.  FINANCIAL AND ECONOMIC ANALYSIS .000 14 875.500 12.958) 4.000 8 875.958 287.500 862.500 12.500 12.667 2 875.500 51.500 12.500 862.500 12.000 3 875.500 862.000 7 875.499 42% 76 0 1 291.000 6 875.167 12.500 862.000 15 875.500 12.000 10 875.500 12.000 5 875.500 862.

667 8.250.000 13 1.000 8. the proposed enterprise can withstand a combination of changes in 11% decrease in output or in output price and 14% increase in the cost of production and marketing of sampaguita garlands.   As shown in Table 40.f.242.000 NET PRESENT VALUE at 20% d.000 1.242.250.000 8.242.000 4 1. The result is shown in Table 40.242.250.000 32.000 1. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 0% Decrease in price of output 0% Cost overran 44% NET CASHFLOW (23.250.000 8.000 12 1.000 1. YEAR CASH INFLOW CASH OUTFLOW 23.FEASIBILITY STUDY RESULTS Table 39.000 = = 77 0 1 416.242.000 8.000 1.667 2 1. FINANCIAL AND ECONOMIC ANALYSIS .250.000 14 1.000 1.958 414.250.000 7 1.000 1.000 6 1.000 8.250.000 8.000 11 1.250.000 8.242.959 27% The ability of the proposed enterprise to cope up with the combined effect of decreases in output.000 8.000 1.250. in output price. Barangay Association/Cooperative Level.000 1.000 8.000 15 1. Sensitivity Analysis (% Cost Overrun).000 3 1.000 1.242.000 1.242.000 8.000 10 1.242.250.000 8.000 1.000 5 1.000 1.242.958) 2.000 8.250.000 1. and in increases in the cost of production and marketing was also computed.242.000 8 1.250.242.250.250.000 1.000 9 1.000 8.242.242.

125 990. This is lower than the private rate of return of 20%. (P) FINANCIAL INTERNAL RATE OF RETURN (FIRR) SENSITIVITY ANALYSIS Reduction in yield 11% Decrease in price of output 11% Cost overran 14% 4.042 990.125 990.875 6. soil conservation impact and on carbon sequestration impact of the proposed project.324 = 24% 78 330.125 14 990.5 Economic and Environmental Impact Evaluation of Ilang-ilang and Sampaguita Production An economic and environmental impact evaluation was made to determine the desirability of the proposed project to the society.125 12 990.f. this could be in terms of the impact to employment generation.875 6.125 990.750 983.250 NET CASHFLOW (23.  There will be positive net benefits to the whole society if the proposed project will be implemented at the current social rate of return of 15%.250 983.250 983.125 990.125 15 990.875 6.875 6.250 983.292 6.125 NET PRESENT VALUE at 20% d.125 13 990.875 6.250 983. Barangay Association/Cooperative Level.958) 2.250 983. Environmental impact is limited to provision of quality air.250 983.875 6.875 6.875 6.   On the economic impact. This can be deduced (without actually computing the net benefits) from the positive benefits generated at 20% private rate of return.875 6.125 990.875 6.875 6.875 = 28.875 6. and household income.875 6.250 983.250 983.250 983.125 11 990.250 983. livelihood opportunities.250 983.125 990.125 10 990.250 983.958 327. YEAR 0 1 2 3 4 5 6 7 8 9 CASH INFLOW CASH OUTFLOW 23. a  FINANCIAL AND ECONOMIC ANALYSIS .125 990.FEASIBILITY STUDY RESULTS Table 40. Sensitivity Analysis (Combined Effect).250 983.

This employment opportunity is biased in favor of the farmermembers whose land areas are rolling. In as much as the financial analysis in both the farm level and association level (new cooperative member of ALYANSA and primary cooperative/association) show positive net benefits using commercial borrowing rate of 20% as the discount factor. • FINANCIAL AND ECONOMIC ANALYSIS . perfumes. women members of the househol as well as the children will be the direct beneficiaries. It will utilize household labor during the spare time of the members of the household.   First. • Again. • It offers additional employment opportunity as well as additional household income. and others. the essential oil production can encourage the ALYANSA or other entrepreneurs to engage in the production of ilang-ilang scented soap. the ilang-ilang plantation offers a new business opportunity to ALYANSA or a cooperative member. Second. ilang-ilang production offers an alternative land use in the whole municipality of Carranglan and therefore additional employment opportunity to the community. which has high potential to become a federation of cooperatives in the municipality of Carranglan. this creates additional employment opportunities to the Carranglan Community The sampaguita home garden will have the following positive benefits to the Carranglan people:   Considering the nature of the proposed project as small scale in nature and will be located in the backyard.FEASIBILITY STUDY RESULTS 79 return higher than the social rate of return (15%).  Third. cologne. it can be deduced that. The proposed enterprise can have both positive forward and backward effects. •  This new business opportunity will create direct employment opportunities to the members of ALYANSA as well as others residents of Carranglan.

Therefore contributes to soil conservation program of the government.  On • •   On environmental Impact: Both the ilang-ilang and sampaguita production project have no negative environmental effect.  Compatible with the community-based forest management program (CBFM). Can contribute to the world-wide campaign on carbon sequestration. sense of responsibility towards the family and entrepreneurship. Rather.FEASIBILITY STUDY RESULTS • 80 Additional benefits will include the development of good values among children like industriousness. Help reduce air pollution by providing scented air not only to Carranglan but also to passers by. the primary cooperative/association level: Garlands production and marketing offers a new business venture which can provide new sources of revenue to the coffer of the organization. FINANCIAL AND ECONOMIC ANALYSIS . Given the financial benefits it will generate. • • • There will be improvement in the vegetative cover of the area. Can contribute to the empowerment of the organization. the land owners will sustain the trees for its flowers not for its wood. the two projects are environmentfriendly.