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Corporate Tax Rate

40.0%

QST
GST
Weighted Avg Cost of Capital

7.0%

GST Input Tax Credit Rate

Decision Period in Years:

Current Year (ie. 2003)

2008

Inflation

2.0%

Old occupancy

59%

New occupancy

65%

# of rooms

280

Delta

17

Price per day

95

Number of days

365

Cash Flow Projection

2008
$0
$0
$0

Pre-tax Income
Capital Cost Allowance
Taxable Income
Tax
Net Income
Add Back Capital Cost Allowance
Subtract Capital Cash Outflow

$0
$0
($8,500,000)

After Tax Cash Flow

($8,500,000)
Total Investment

For IRR Calculation


For Payback Period Calculation

Net Present Value


Internal Rate of Return
Payback Period (years)
Profitability Index

8,500,000
($8,007,310)
($8,500,000)

2009
1,315,475
($290,000)
$1,025,475
($410,190)

2010
1,315,475
($544,400)
$771,075
($308,430)

2011
1,315,475
($479,424)
$836,051
($334,420)

2012
1,315,475
($425,687)
$889,787
($355,915)

2013
1,315,475
($381,012)
$934,463
($373,785)

2014
1,315,475
($110,592)
$1,204,883
($481,953)

2015
1,315,475
($88,474)
$1,227,001
($490,800)

2016
1,315,475
($334,203)
$981,272
($392,509)

$615,285
$290,000
$0

$462,645
$544,400
$0

$501,630
$479,424
$0

$533,872
$425,687
$0

$560,678
$381,012
$0

$722,930
$110,592
$0

$736,201
$88,474
$0

$588,763
$334,203
$0

$905,285

$1,007,045

$981,054

$959,560

$941,689

$833,522

$824,674

$922,966

4,774,001
$905,285
($7,594,715)

$1,007,045
($6,587,671)

($2,471,220)
-1.82%
10.23
0.71

$981,054
($5,606,616)

$959,560
($4,647,057)

$941,689
($3,705,367)

$833,522
($2,871,846)

$824,674
($2,047,172)

$922,966
($1,124,206)

Statement of Cash Flows


Project Name

2008

2009

2010

2011

2012

2013

2014

2015

2016

CAPITAL OUTFLOWS:
building

(7,000,000) $

Furniture, fixtures and equipment


TOTAL CAPITAL OUTFLOWS

$
$

(1,500,000) $
(8,500,000) $

$
$

$
$

$
$

$
$

$
$

$
$

$
$

Revenue conference center


Additional revenue hotel
Total Cost Savings

$
$
$

5,500,000
589,475
-

$
$
$

5,500,000
589,475
-

$
$
$

5,500,000
589,475
-

$
$
$

5,500,000
589,475
-

$
$
$

5,500,000
589,475
-

$
$
$

5,500,000
589,475
-

$
$
$

5,500,000
589,475
-

$
$
$

5,500,000
589,475
-

TOTAL CASH INFLOWS

6,089,475

6,089,475

6,089,475

6,089,475

6,089,475

6,089,475

6,089,475

6,089,475

50% of Revenue
Fixed cost
additional cost for Auditorium
Variable cost - room

$
$
$
$

$
$
$
$

(2,750,000)
(1,000,000)
(800,000)
(224,001)

$
$
$
$

(2,750,000)
(1,000,000)
(800,000)
(224,001)

$
$
$
$

(2,750,000)
(1,000,000)
(800,000)
(224,001)

$
$
$
$

(2,750,000)
(1,000,000)
(800,000)
(224,001)

$
$
$
$

(2,750,000)
(1,000,000)
(800,000)
(224,001)

$
$
$
$

(2,750,000)
(1,000,000)
(800,000)
(224,001)

$
$
$
$

(2,750,000)
(1,000,000)
(800,000)
(224,001)

$
$
$
$

(2,750,000)
(1,000,000)
(800,000)
(224,001)

Total Expenses

(4,774,001) $
-

(4,774,001) $
-

(4,774,001)
-

CASH INFLOWS:

CASH OUTFLOWS:

(4,774,001) $
-

(4,774,001) $
-

(4,774,001) $
-

(4,774,001) $
-

(4,774,001) $
-

TOTAL CASH FLOWS:


Pre-Tax Cashflow (Non Capital)
Capital Cost Allowance
Taxable Income
Taxes
Capital Outflow
Add Back CCA
After-tax Cashflow

$
$
$
$
$
$
$

(8,500,000)
(8,500,000)

NPV (7%):

(2,471,220)

$
$
$
$
$
$
$

1,315,475
(290,000)
1,025,475
(410,190)
290,000
905,285

$
$
$
$
$
$
$

IRR

1,315,475
(544,400)
771,075
(308,430)
544,400
1,007,045

$
$
$
$
$
$
$

-1.82%

1,315,475
(479,424)
836,051
(334,420)
479,424
981,054

$
$
$
$
$
$
$

Payback

1,315,475
(425,687)
889,787
(355,915)
425,687
959,560

$
$
$
$
$
$
$

1,315,475
(381,012)
934,463
(373,785)
381,012
941,689

$
$
$
$
$
$
$

1,315,475
(110,592)
1,204,883
(481,953)
110,592
833,522

$
$
$
$
$
$
$

1,315,475
(88,474)
1,227,001
(490,800)
88,474
824,674

$
$
$
$
$
$
$

1,315,475
(334,203)
981,272
(392,509)
334,203
922,966

10.23

P&L Statement
Project Name
BUSINESS CASE

2008

Building
Furniture, fixtures and equipment
Capital Expenditures

(7,000,000)
(1,500,000)
(8,500,000)

2009

Income Statement Impacts


DEPRECIATION
Fixtures/Equipment
Total

2010
-

2011
-

2012
-

2013
-

2014
-

2015

2016

(300,000)
2,033,333

(240,000)
2,093,333

(192,000)
2,141,333

(153,600)
(153,600)

(122,880)
(122,880)

(98,304)
(98,304)

(78,643)
(78,643)

(62,915)
(62,915)

(2,750,000)
(1,000,000)
(800,000)
(224,001)
(4,774,001)

(2,750,000)
(1,000,000)

(2,750,000)
(1,000,000)

(2,750,000)
(1,000,000)

(2,750,000)
(1,000,000)

(2,750,000)
(1,000,000)

(2,750,000)
(1,000,000)

(2,750,000)
(1,000,000)

(224,001)
(4,774,001)

(224,001)
(4,774,001)

(224,001)
(4,774,001)

(224,001)
(4,774,001)

(224,001)
(4,774,001)

(224,001)
(4,774,001)

(224,001)
(4,774,001)

COSTS
50% of Revenue
Fixed cost
additional cost for Auditorium
Variable cost - room
Business Costs (Enterprise)

External Labour costs

Other Expense Costs


Annual Maintenance Costs

Total Expenses

(4,774,001)

(4,774,001)

(4,774,001)

(4,774,001)

(4,774,001)

(4,774,001)

(4,774,001)

(4,774,001)

5,500,000
589,475
-

5,500,000
589,475
-

5,500,000
589,475
-

5,500,000
589,475
-

5,500,000
589,475
-

5,500,000
589,475
-

5,500,000
589,475
-

5,500,000
589,475
-

3,348,808
(1,339,523)
2,009,285

3,408,808
(1,363,523)
2,045,285

3,456,808
(1,382,723)
2,074,085

1,161,875
(464,750)
697,125

1,192,595
(477,038)
715,557

1,217,171
(486,868)
730,302

1,236,831
(494,733)
742,099

1,252,560
(501,024)
751,536

Benefits:
Revenue conference center
Additional revenue hotel
Total Cost Savings
Earnings before Tax
Income Tax
Earnings after Tax

WORST CASE:
Corporate Tax Rate

40.0%

QST
GST
Weighted Avg Cost of Capital

7.0%

GST Input Tax Credit Rate

Decision Period in Years:

Current Year (ie. 2003)

2008

Inflation

2.0%

Old occupancy

59%

New occupancy

70%

# of rooms

280

Delta

31

price per day

95

number of days

365

Cash Flow Projection


Pre-tax Income
Capital Cost Allowance
Taxable Income
Tax

2008
$0
$0
$0

2009
2,366,454
($290,000)
$2,076,454
($830,581)

2010
2,366,454
($544,400)
$1,822,054
($728,821)

2011
2,366,454
($479,424)
$1,887,030
($754,812)

2012
2,366,454
($425,687)
$1,940,766
($776,307)

2013
2,366,454
($381,012)
$1,985,442
($794,177)

2014
2,366,454
($110,592)
$2,255,862
($902,345)

2015
2,366,454
($88,474)
$2,277,980
($911,192)

2016
2,366,454
($334,203)
$2,032,251
($812,900)

Net Income
Add Back Capital Cost Allowance
Subtract Capital Cash Outflow
After Tax Cash Flow

$0
$0
($8,500,000)
($8,500,000)

$1,245,872
$290,000
$0
$1,535,872

$1,093,232
$544,400
$0
$1,637,632

$1,132,218
$479,424
$0
$1,611,642

$1,164,460
$425,687
$0
$1,590,147

$1,191,265
$381,012
$0
$1,572,277

$1,353,517
$110,592
$0
$1,464,109

$1,366,788
$88,474
$0
$1,455,262

$1,219,350
$334,203
$0
$1,553,553

Total Investment
For IRR Calculation
For Payback Period Calculation

8,500,000
($8,007,310)
($8,500,000)

5,708,472
$1,535,872
($6,964,128)

$1,637,632
($5,326,496)

$1,611,642
($3,714,854)

$1,590,147
($2,124,707)

$1,572,277
($552,430)

$1,464,109
$911,678

$1,455,262
$2,366,940

$1,553,553
$3,920,493

Net Present Value


Internal Rate of Return
Payback Period (years)
Profitability Index

$1,294,206
11.08%
6.38
1.15