Even Cash Flows

Year 1 Year 2 Year 3

Revenue 1,500,000.00 3,000,000.00 4,500,000.00
Present value of 1 0.8333333333 0.8333333333 0.8333333333
PV of cash flow( revenue) 1,250,000.00 2,500,000.00 3,750,000.00

Cash Inflow from rentals

(Ave. rentals) 250+350/2= 300 per sq. m.
Floor area 923
2nd flr 923 300.00
3rd flr 923 300.00
4th flr 833 300.00

Hence: Cash Flow per year(for rentals)

Year 1 Year 2 Year 3
Guarantee deposit 30,000,000.00
Yearly rental 9,644,400.00 9,644,400.00 9,644,400.00
Annual rental cash flow 39,644,400.00 9,644,400.00 9,644,400.00
Present value of 1 0.83333333333 0.83333333333 0.83333333333
Present value 33,037,000.00 8,037,000.00 8,037,000.00

AGGREGATE CASH FLOW of REVENUE and RENTALS

Revenue 1,500,000.00 3,000,000.00 4,500,000.00
Rental 39,644,400.00 9,644,400.00 9,644,400.00
Total 41,144,400.00 12,644,400.00 14,144,400.00
Present value of 1 0.83333333333 0.83333333333 0.83333333333
34,287,000.00 10,537,000.00 11,787,000.00
 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
6,000,000.00 7,500,000.00 9,000,000.00 10,500,000.00 12,000,000.00 13,500,000.00
0.8333333333 0.8333333333 0.8333333333 0.8333333333 0.8333333333 0.8333333333
5,000,000.00 6,250,000.00 7,500,000.00 8,750,000.00 10,000,000.00 11,250,000.00

350/2= 300 per sq. m. No. of months Yearly rentals

276,900.00 12.00 3,322,800.00

276,900.00 12.00 3,322,800.00
249,900.00 12.00 2,998,800.00
Total 9,644,400.00
No. of years 10
Cash inflows 96,444,000.00
Add: Guarantee 30,000,000.00
Deposit
Total Cash flow 126,444,000.00

Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00

9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00
0.833333333333 0.833333333333 0.833333333333 0.83333333333 0.83333333333 0.83333333333
8,037,000.00 8,037,000.00 8,037,000.00 8,037,000.00 8,037,000.00 8,037,000.00

6,000,000.00 7,500,000.00 9,000,000.00 10,500,000.00 12,000,000.00 13,500,000.00

9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00
15,644,400.00 17,144,400.00 18,644,400.00 20,144,400.00 21,644,400.00 23,144,400.00
0.833333333333 0.833333333333 0.833333333333 0.83333333333 0.83333333333 0.83333333333
13,037,000.00 14,287,000.00 15,537,000.00 16,787,000.00 18,037,000.00 19,287,000.00
 Year 10 TOTAL
15,000,000.00 82,500,000.00
0.8333333333 0.8333333333
12,500,000.00 68,750,000.00

Year 10 TOTAL

9,644,400.00
9,644,400.00 126,444,000.00
0.83333333333 0.833333333333
8,037,000.00 105,370,000.00

15,000,000.00 82,500,000.00
9,644,400.00 126,444,000.00
24,644,400.00 208,944,000.00
0.83333333333 0.833333333333
20,537,000.00 174,120,000.00 Cash Inflow
Less: 155,000,000.00 Cash Outflow
19,120,000.00 NPV
Even Cash Flows
Year 1 Year 2 Year 3 Year 4
Revenue 1,500,000.00 3,000,000.00 4,500,000.00 6,000,000.00
Present value of 1 0.833333333333 0.69444444444 0.578703703704 0.4822530864198
PV of cash flow( revenue) 1,250,000.00 2,083,333.33 1736111.111111 2,893,518.52

Cash Inflow from rentals

(Ave. rentals) 250+350/2= 300 per sq. m.
Floor area 923
2nd flr 923 300.00 276,900.00
3rd flr 923 300.00 276,900.00
4th flr 833 300.00 249,900.00

Total Cash flow

Hence: Cash Flow per year(for rentals)
Year 1 Year 2 Year 3 Year 4
Guarantee deposit 30,000,000.00
Yearly rental 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00
Annual rental cash flow 39,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00
Present value of 1 0.833333333333 0.69444444444 0.578703703704 0.4822530864198
Present value 33,037,000.00 6,697,500.00 5,581,250.00 4,651,041.67

AGGREGATE CASH FLOW of REVENUE and RENTALS

Revenue 1,500,000.00 3,000,000.00 4,500,000.00 6,000,000.00
Rental 39,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00
Total 41,144,400.00 12,644,400.00 14,144,400.00 15,644,400.00
Present value of 1 0.833333333333 0.69444444444 0.578703703704 0.4822530864198
34,287,000.00 8,780,833.33 8,185,416.67 7,544,560.19
 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
7,500,000.00 9,000,000.00 10,500,000.00 12,000,000.00 13,500,000.00 15,000,000.00
0.40187757201646 0.33489797668 0.27908164723 0.23256803936 0.19380669947 0.16150558289
3,014,081.79 3,014,081.79 2,930,357.30 2,790,816.47 2,616,390.44 2,422,583.74

No. of months Yearly rentals

12.00 3,322,800.00
12.00 3,322,800.00
12.00 2,998,800.00
Total 9,644,400.00
No. of years 10
Cash inflows 96,444,000.00
Add: Guarantee 30,000,000.00
Deposit
126,444,000.00

Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00

9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00
0.40187757201646 0.33489797668 0.27908164723 0.23256803936 0.19380669947 0.16150558289
3,875,868.06 3,229,890.05 2,691,575.04 2,242,979.20 1,869,149.33 1,557,624.44

7,500,000.00 9,000,000.00 10,500,000.00 12,000,000.00 13,500,000.00 15,000,000.00

9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00
17,144,400.00 18,644,400.00 20,144,400.00 21,644,400.00 23,144,400.00 24,644,400.00
0.40187757201646 0.33489797668 0.27908164723 0.23256803936 0.19380669947 0.16150558289
6,889,949.85 6,243,971.84 5,621,932.33 5,033,795.67 4,485,539.78 3,980,208.19
Salvage Value 62,000,000.00 0.161505583
 TOTAL
82,500,000.00

24,751,274.50

TOTAL

126,444,000.00

65,433,877.78

91,053,207.84 Cash Inflow (Revenues)

10,013,346.15 Salvage Value
101,066,553.98 PV of CASH INFLOW
155,000,000.00 PV of CASH OUTFLOW
(53,933,446.02) NPV
Shown below is a computation of the net present value for Julia Bugay to decide on whether to proceed with the proposed project or not.

FAMOUS RESTAURANT, INC.

Restaurant 1,500,000.00 3,000,000.00 4,500,000.00 6,000,000.00 7,500,000.00 9,000,000.00 10,500,000.00 12,000,000.00 13,500,000.00 15,000,000.00

INITIAL Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Cash Outflows (155,000,000.00)
Cash Inflows Resto-Cash Margin (1) 450,000.00 900,000.00 1,350,000.00 1,800,000.00 2,250,000.00 2,700,000.00 3,150,000.00 3,600,000.00 4,050,000.00 4,500,000.00
Guarantee Deposit 30,000,000.00
Rentals (2) 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00 9,644,400.00
Salvage Value 62,000,000.00
Total (155,000,000.00) 40,094,400.00 10,544,400.00 10,994,400.00 11,444,400.00 11,894,400.00 12,344,400.00 12,794,400.00 13,244,400.00 13,694,400.00 76,144,400.00
Less: Depreciation (6,200,000.00) (6,200,000.00) (6,200,000.00) (6,200,000.00) (6,200,000.00) (6,200,000.00) (6,200,000.00) (6,200,000.00) (6,200,000.00) (6,200,000.00)
Net Income before tax 33,894,400.00 4,344,400.00 4,794,400.00 5,244,400.00 5,694,400.00 6,144,400.00 6,594,400.00 7,044,400.00 7,494,400.00 69,944,400.00
Less: Tax of 30% (10,168,320.00) (1,303,320.00) (1,438,320.00) (1,573,320.00) (1,708,320.00) (1,843,320.00) (1,978,320.00) (2,113,320.00) (2,248,320.00) (20,983,320.00)
Net Income before tax 23,726,080.00 3,041,080.00 3,356,080.00 3,671,080.00 3,986,080.00 4,301,080.00 4,616,080.00 4,931,080.00 5,246,080.00 48,961,080.00
Add: Depreciation 6,200,000.00 6,200,000.00 6,200,000.00 6,200,000.00 6,200,000.00 6,200,000.00 6,200,000.00 6,200,000.00 6,200,000.00 6,200,000.00
Net Cash Inflow 29,926,080.00 9,241,080.00 9,556,080.00 9,871,080.00 10,186,080.00 10,501,080.00 10,816,080.00 11,131,080.00 11,446,080.00 55,161,080.00
x x x x x x x x x x x
PVF @ 20% 1.0000 0.8333 0.6944 0.5787 0.4823 0.4019 0.3349 0.2791 0.2326 0.1938 0.1615
PV of Cash Flow (155,000,000.00) 24,938,400.00 6,417,416.67 5,530,138.89 4,760,358.80 4,093,557.10 3,516,790.44 3,018,569.42 2,588,733.45 2,218,326.99 8,908,822.38

NET PRESENT VALUE (89,008,885.86) Not desirable

Notes:
1. A 15% Increase in Restaurant Revenues per year

Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10
1.5M 3M 4.5M 6M 7.5M 9M 10.5M 12M 13.5M 15M
Net Cash Margin of 30% of Sales
450T 900T 1350T 1800T 2250T 2700T 3150T 3600T 4050T 4500T

2. Rental Revenues
Php250+350 = Php600 / 2 = Php300 per sq m (ave. rent)