PFS: Financial Aspect –

Project Financing and

Evaluation
A. Projected Statement of
Comprehensive Income
B. Projected Statement of Financial
Position
C. Projected Cash Flow
 Sources of
Financing
• Equity
• Loan Financing
a. Short-term loans
b. Long-term loans
 Economic Evaluation
• Break-Even Analysis

Break-Even Formula:

𝑭𝒊𝒙𝒆𝒅 𝑪𝒐𝒔𝒕𝒔
𝑩𝑬𝑷(𝒖𝒏𝒊𝒕𝒔) =
𝑼𝒏𝒊𝒕 𝑺𝒆𝒍𝒍𝒊𝒏𝒈 𝑷𝒓𝒊𝒄𝒆 − 𝑼𝒏𝒊𝒕 𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑪𝒐𝒔𝒕𝒔
• Net Present Value
• Internal Rate of Return (IRR)
• Break-Even Time or Discounted Payback
Period
• Payback Period
Net Present Value
 Internal Rate of Return (IRR)
IRR Formula:

∗𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕 𝒊𝒏 𝒕𝒉𝒆 𝑷𝒓𝒐𝒋𝒆𝒄𝒕

IRR = 𝑨𝒏𝒏𝒖𝒂𝒍 𝑪𝒂𝒔𝒉 𝑰𝒏𝒇𝒍𝒐𝒘

*present value
Discounted Payback Period
 Payback Period

Payback Period = 𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕 𝒊𝒏 𝒕𝒉𝒆 𝑷𝒓𝒐𝒋𝒆𝒄𝒕

𝑨𝒏𝒏𝒖𝒂𝒍 𝑪𝒂𝒔𝒉 𝑰𝒏𝒇𝒍𝒐𝒘
• Simple or Accounting Rate of Return
(ARR)
formula:
𝐼𝑛𝑐𝑟𝑒𝑚𝑒𝑛𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒𝑠
𝑙𝑒𝑠𝑠 𝑖𝑛𝑐𝑟𝑒𝑚𝑒𝑛𝑡𝑎𝑙 𝑐𝑜𝑠𝑡𝑠 𝑎𝑛𝑑 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠
𝐴𝑅𝑅 = 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

or

𝐴𝑛𝑛𝑢𝑎𝑙 𝐶𝑎𝑠ℎ 𝐼𝑛𝑓𝑙𝑜𝑤

𝑓𝑟𝑜𝑚 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 − 𝐼𝑛𝑐𝑟𝑒𝑚𝑒𝑛𝑡𝑎𝑙 𝐴𝑛𝑛𝑎𝑙
𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛
𝐴𝑅𝑅 = 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
• Financial Analysis
• Sensitivity Analysis