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 2
2 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 36
Results 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

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%

Result: Fast Food Project looks lucrative among three.

After Tax Cash Flow Analysis

ATCF ANALYSIS RESULTS

FMCG product distributorship Fast food Franchise Cold Storage
Present Worth (PW) $ 426,872.07 $ 377,759.21 $ 468,433.10
IRR % 13.590% 14.990% 13.710%

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.)
 4

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

Probabilistic Analysis Results

Parameters Values Remarks
Mean $ (280,193.00)
FMCG distributorship High Risk Project with negetive
Std Deviation $ 2,460,749.00 mean
Prob (PW =< 0) ~ 55.000%

Parameters Values Remarks

Mean $ (111,672.00)
Fast Food Franchise Outlet High Risk Project with negetive
Std Deviation $ 1,686,809.00 mean
Prob (PW =< 0) ~ 45.000%

Parameters Values Remarks

Mean $ (212,512.00)
Cold Storage High Risk Project with negetive
Std Deviation $ 5,102,515.00 mean
Prob (PW =< 0) ~ 45.000%

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.

Detarministic Analysis - Sensitivity

Factors Swing^2 (PW) Swing^2 (IRR)
FMCG product distributorship Profit 49.800% 51.900%
Sales 29.100% 29.500%

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

Wastage 55.900% 51.800%
Fast Food Franchise Outlet
Profit 31.400% 33.100%
Sales 8.000% 9.600%

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

Profit 86.200% 87.100%
Cold Storage
Sales 8.800% 7.900%
Wastage 3.300% 3.000%
 5

Break-Even Values of Sensitive Factors

Factors Break Even Point
FMCG product distributorship Profit 17.000%
Sales $ 7,680,000.00

Factors Break Even Point

Wastage 18.000%
Fast Food Franchise Outlet
Profit 51.000%
Sales $ 1,770,000.00

Factors Break Even Point

Profit 40.000%
Cold Storage
Sales $ 4,100,000.00
Wastage 11.000%

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.

Profit Margin limit Low 50.000%

What If condition (strictly Mean 65.000%
controlled by 6 sigma level
High 100.000%
quality control and high class
marketing strategy in Fast food Wastage control limit Low 5.000%
& Cold storage business) Mean 7.500%
High 10.000%
 6

What If condition Results

Parameters Values Remarks
Mean $ 5,027,304.00
Cold Storage Low Risk Project with large
Std Deviation $ 2,728,403.00 mean
Prob (PW =< 0) ~ 2.000%

Parameters Values Remarks

Mean $ 44,844.00
Fast Food Franchise Outlet
Std Deviation $ 1,153,969.00 High Risk Project with low mean
Prob (PW =< 0) ~ 40.000%

Result: Cold Storage Project is become profitable and low risk

 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

FMCG product distributorship

Initial Investments Cost/Unit Unit Requirement Total Cost Market Value @ End 15 yrs
Land $ 300.00 Square feet 10000 $ 3,000,000.00 $ 3,000,000.00
Shed constructed area $ 300.00 Square feet 8000 $ 2,400,000.00 $ 600,000.00
Racking $ 100.00 Square feet 4200 $ 420,000.00 $ 105,000.00
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 $ 8,000.00
IT infrastructure $ 3,000.00 Units 1 $ 3,000.00 $ -
$ 5,915,500.00 $ 3,713,000.00
Expenses Expected Expenses (Per Month) Expenses (Per year)
Labor(Wages including bonus) $ 2,000.00 Persons 10 $ 20,000.00 $ 260,000.00
Electricity $ 1,500.00 - - $ 1,500.00 $ 18,000.00
Fuel $ 2,000.00 - - $ 2,000.00 $ 24,000.00
Phone bills $ 250.00 - - $ 250.00 $ 3,000.00
Stationaries $ 50.00 - - $ 50.00 $ 600.00
Purchases $ 600,000.00 - - $ 600,000.00 $ 7,200,000.00
$ 7,505,600.00
Revenues Expected
Sales $ 708,000.00 - - $ 708,000.00 $ 8,496,000.00
$ 8,496,000.00

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

$ 3,713,000.00

Study Period years 15 Years

 8

Fast Food Franchise operations

Initial Investments Cost/Unit Unit Requirement Total Cost Market Value @ End of Life
Land $ 300.00 Square feet 4000 $ 1,200,000.00 $ 1,200,000.00
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 $ -
IT infrastructure $ 3,000.00 Units 1 $ 3,000.00 $ -
$ 2,456,000.00 $ 1,200,000.00
Expenses Expected Cost/Month Unit Requirement Expenses (Per Month) Expenses (Per year)
Labor(Wages including bonus) $ 2,000.00 Persons 8 $ 16,000.00 $ 208,000.00
Electricity $ 2,000.00 - - $ 2,000.00 $ 24,000.00
Fuel $ 2,000.00 - - $ 2,000.00 $ 24,000.00
Phone bills $ 800.00 - - $ 800.00 $ 9,600.00
Stationaries $ 50.00 - - $ 50.00 $ 600.00
Purchases $ 125,000.00 - - $ 125,000.00 $ 1,500,000.00
$ 1,766,200.00
Revenues Expected
Sales $ 185,000.00 - - $ 185,000.00 $ 2,220,000.00
$ 2,220,000.00

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

$ 1,200,000.00

Study Period years 15 Years

Cold Storage
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 $ -
IT infrastructure $ 3,000.00 Units 1 $ 3,000.00 $ -
$ 6,085,500.00 $ 3,000,000.00
Expenses Expected Expenses (Per Month) Expenses (Per year)
Labor(Wages including bonus) $ 2,500.00 Persons 5 $ 12,500.00 $ 162,500.00
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 life $ 3,000,000.00 - - $ 3,000,000.00 $ 3,000,000.00

$ 3,000,000.00

Study Period years 15 Years

 9

Cash Flow Models Development

• FMCG products distributorship (dry FMCG Products)

MV(15) = $3,713,000

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

Initial Investment = $5,915,500

• Fast Food outlet (with his own brand)

MV(15) = $1,200,000

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

Initial Investment = $2,456,000

 10

• Cold storage (For Fruits and Vegetables)

MV(15) = $3,000,000

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

Initial Investment = $6,085,500

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

FMCG product distributorship Fast food Franchise Cold Storage
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 Market value @ end $ 1,200,000.00 Market value @ 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 Capital Recovery (CR) $ 394,776.00 Capital Recovery (CR) $ 977,620.50
Annual Profit $ 990,400.00 Annual Profit $ 453,800.00 Annual Profit $ 1,035,700.00
 11

Finding IRR (Using goal seek)

FMCG product distributorship Fast food Franchise Cold Storage
Study Period 15 Study Period 15 Study Period 15
Interest rate i% 16.023% Interest rate i% 17.611% Interest rate i% 16.041%
Initial Investment $ 5,915,500.00 Initial Investment $ 2,456,000.00 Initial Investment $ 6,085,500.00
Revenue $ 8,496,000.00 Revenue $ 2,220,000.00 Revenue $ 6,060,000.00
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 Market value @ end $ 1,200,000.00 Market value @ end $ 3,000,000.00
Before Tax MARR % 15% Before Tax MARR % 15% Before Tax MARR % 15%
(P/F,i%,15) 0.107605214 (P/F,i%,15) 0.087759174 (P/F,i%,15) 0.1073567
(P/A,i%,15) 5.569428354 (P/A,i%,15) 5.180010999 (P/A,i%,15) 5.564767693
PW (i%) $ 0.00 PW (i%) $ 0.00 PW (i%) $ 0.00
IRR % 16.023% IRR % 17.611% IRR % 16.041%

Finding ERR
FMCG product distributorship Fast food Franchise Cold Storage
Study Period 15 Study Period 15 Study Period 15
Before Tax MARR % 15% Before Tax MARR % 15% Before Tax MARR % 15%
Initial Investment $ 5,915,500.00 Initial Investment $ 2,456,000.00 Initial Investment $ 6,085,500.00
Revenue $ 8,496,000.00 Revenue $ 2,220,000.00 Revenue $ 6,060,000.00
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 Market value @ end $ 1,200,000.00 Market value @ end $ 3,000,000.00
(F/A,15 %,15) 47.58 (F/A,15 %,15) 47.58 (F/A,15 %,15) 47.58
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 Cash Inflows $ 22,791,804.00 FW of Cash Inflows $ 52,278,606.00
ERR % 15.419% ERR % 16.012% ERR % 15.417%

Summary
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%
Reject Select Reject

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.
FMCG product distributorship EoY 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Shed constructed area 25% of IA & 3% AA Book Value $ 2,400,000.00 $ 1,728,000.00 $ 1,656,000.00 $ 1,584,000.00 $ 1,512,000.00 $ 1,440,000.00 $ 1,368,000.00 $ 1,296,000.00 $ 1,224,000.00 $ 1,152,000.00 $ 1,080,000.00 $ 1,008,000.00 $ 936,000.00 $ 864,000.00 $ 792,000.00 $ 720,000.00
Allowance $ - $ 672,000.00 $ 72,000.00 $ 72,000.00 $ 72,000.00 $ 72,000.00 $ 72,000.00 $ 72,000.00 $ 72,000.00 $ 72,000.00 $ 72,000.00 $ 72,000.00 $ 72,000.00 $ 72,000.00 $ 72,000.00 $ 72,000.00
Racking 25% of IA & 3% AA Book Value $ 420,000.00 $ 302,400.00 $ 289,800.00 $ 277,200.00 $ 264,600.00 $ 252,000.00 $ 239,400.00 $ 226,800.00 $ 214,200.00 $ 201,600.00 $ 189,000.00 $ 176,400.00 $ 163,800.00 $ 151,200.00 $ 138,600.00 $ 126,000.00
Allowance $ - $ 117,600.00 $ 12,600.00 $ 12,600.00 $ 12,600.00 $ 12,600.00 $ 12,600.00 $ 12,600.00 $ 12,600.00 $ 12,600.00 $ 12,600.00 $ 12,600.00 $ 12,600.00 $ 12,600.00 $ 12,600.00 $ 12,600.00
Furnitures & Interior 10 years Book Value $ 5,000.00 $ 3,600.00 $ 3,200.00 $ 2,800.00 $ 2,400.00 $ 2,000.00 $ 1,600.00 $ 1,200.00 $ 800.00 $ 400.00 $ -
Allowance $ - $ 1,400.00 $ 400.00 $ 400.00 $ 400.00 $ 400.00 $ 400.00 $ 400.00 $ 400.00 $ 400.00 $ 400.00
Handling Equipments 6 years Book Value $ 7,500.00 $ 5,000.00 $ 4,000.00 $ 3,000.00 $ 2,000.00 $ 1,000.00 $ -
Allowance $ - $ 2,500.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 1,000.00
Trans vehicles (delivery vans) 6 years Book Value $ 80,000.00 $ 53,333.33 $ 42,666.67 $ 32,000.00 $ 21,333.33 $ 10,666.67 $ -
Allowance $ - $ 26,666.67 $ 10,666.67 $ 10,666.67 $ 10,666.67 $ 10,666.67 $ 10,666.67
IT infrastructure 1 year Book Value $ 3,000.00 $ -
Allowance $ - $ 3,000.00

EoY 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Depreciation Calculations:

Depriciation $ - $ 823,166.67 $ 96,666.67 $ 96,666.67 $ 96,666.67 $ 96,666.67 $ 96,666.67 $ 85,000.00 $ 85,000.00 $ 85,000.00 $ 85,000.00 $ 84,600.00 $ 84,600.00 $ 84,600.00 $ 84,600.00 $ 84,600.00

Fast food Franchise EoY 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Shed constructed area 25% of IA & 3% AA Book Value $ 825,000.00 $ 594,000.00 $ 569,250.00 $ 544,500.00 $ 519,750.00 $ 495,000.00 $ 470,250.00 $ 445,500.00 $ 420,750.00 $ 396,000.00 $ 371,250.00 $ 346,500.00 $ 321,750.00 $ 297,000.00 $ 272,250.00 $ 247,500.00
Allowance $ - $ 231,000.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00
Kitchen Equipments 6 years Book Value $ 100,000.00 $ 66,666.67 $ 53,333.33 $ 40,000.00 $ 26,666.67 $ 13,333.33 $ (0.00)
Allowance $ - $ 33,333.33 $ 13,333.33 $ 13,333.33 $ 13,333.33 $ 13,333.33 $ 13,333.33
Furnitures & Interior 10 years Book Value $ 270,000.00 $ 194,400.00 $ 172,800.00 $ 151,200.00 $ 129,600.00 $ 108,000.00 $ 86,400.00 $ 64,800.00 $ 43,200.00 $ 21,600.00 $ -
Allowance $ - $ 75,600.00 $ 21,600.00 $ 21,600.00 $ 21,600.00 $ 21,600.00 $ 21,600.00 $ 21,600.00 $ 21,600.00 $ 21,600.00 $ 21,600.00
Franchise fees license AA of 20% for 5 years Book Value $ 8,000.00 $ 6,400.00 $ 4,800.00 $ 3,200.00 $ 1,600.00 $ -
Allowance $ - $ 1,600.00 $ 1,600.00 $ 1,600.00 $ 1,600.00 $ 1,600.00
Trans vehicles (motor cycles) 8 years Book Value $ 50,000.00 $ 35,000.00 $ 30,000.00 $ 25,000.00 $ 20,000.00 $ 15,000.00 $ 10,000.00 $ 5,000.00 $ -
Allowance $ - $ 15,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00
IT infrastructure 1 year Book Value $ 3,000.00 $ -
Allowance $ - $ 3,000.00

EoY 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Depriciation $ - $ 359,533.33 $ 66,283.33 $ 66,283.33 $ 66,283.33 $ 66,283.33 $ 64,683.33 $ 51,350.00 $ 51,350.00 $ 46,350.00 $ 46,350.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00 $ 24,750.00

Cold Storage EoY 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Shed constructed area 25% of IA & 3% AA Book Value $ 1,800,000.00 $ 1,296,000.00 $ 1,242,000.00 $ 1,188,000.00 $ 1,134,000.00 $ 1,080,000.00 $ 1,026,000.00 $ 972,000.00 $ 918,000.00 $ 864,000.00 $ 810,000.00 $ 756,000.00 $ 702,000.00 $ 648,000.00 $ 594,000.00 $ 540,000.00
Allowance $ - $ 504,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00
Cooling Equipments 6 years Book Value $ 1,200,000.00 $ 800,000.00 $ 640,000.00 $ 480,000.00 $ 320,000.00 $ 160,000.00 $ -
Allowance $ - $ 400,000.00 $ 160,000.00 $ 160,000.00 $ 160,000.00 $ 160,000.00 $ 160,000.00
Generator 1 year Book Value $ 20,000.00 $ -
Allowance $ - $ 20,000.00
Furnitures 10 years Book Value $ 2,500.00 $ 1,800.00 $ 1,600.00 $ 1,400.00 $ 1,200.00 $ 1,000.00 $ 800.00 $ 600.00 $ 400.00 $ 200.00 $ -
Allowance $ - $ 700.00 $ 200.00 $ 200.00 $ 200.00 $ 200.00 $ 200.00 $ 200.00 $ 200.00 $ 200.00 $ 200.00
Handling Equipments 6 years Book Value $ 20,000.00 $ 13,333.33 $ 10,666.67 $ 8,000.00 $ 5,333.33 $ 2,666.67 $ -
Allowance $ - $ 6,666.67 $ 2,666.67 $ 2,666.67 $ 2,666.67 $ 2,666.67 $ 2,666.67
Trans vehicles (Containers) 10 years Book Value $ 40,000.00 $ 28,800.00 $ 25,600.00 $ 22,400.00 $ 19,200.00 $ 16,000.00 $ 12,800.00 $ 9,600.00 $ 6,400.00 $ 3,200.00 $ -
Allowance $ - $ 11,200.00 $ 3,200.00 $ 3,200.00 $ 3,200.00 $ 3,200.00 $ 3,200.00 $ 3,200.00 $ 3,200.00 $ 3,200.00 $ 3,200.00
IT infrastructure 1 year Book Value $ 3,000.00 $ -
Allowance $ - $ 3,000.00

EoY 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Depriciation $ - $ 945,566.67 $ 220,066.67 $ 220,066.67 $ 220,066.67 $ 220,066.67 $ 220,066.67 $ 57,400.00 $ 57,400.00 $ 57,400.00 $ 57,400.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00 $ 54,000.00
12
 13

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

Tax=17% After Tax MARR= 12.40%

FMCG product distributorship
Income tax Cash After Tax Cash
End of the Year Before Tax Cash flow Depreciation Taxable Income PW of ATCF
Flow Flow
k A B C=A-B D=-tC E=A+D F=E/(1+i)^k
0 $ (5,915,500.00) $ - $ - $ - $ (5,915,500.00) $ (5,915,500.00)
1 $ 990,400.00 $ 823,166.67 $ 167,233.33 $ (28,429.67) $ 961,970.33 $ 855,845.49
2 $ 990,400.00 $ 96,666.67 $ 893,733.33 $ (151,934.67) $ 838,465.33 $ 663,670.46
3 $ 990,400.00 $ 96,666.67 $ 893,733.33 $ (151,934.67) $ 838,465.33 $ 590,454.15
4 $ 990,400.00 $ 96,666.67 $ 893,733.33 $ (151,934.67) $ 838,465.33 $ 525,315.08
5 $ 990,400.00 $ 96,666.67 $ 893,733.33 $ (151,934.67) $ 838,465.33 $ 467,362.17
6 $ 990,400.00 $ 96,666.67 $ 893,733.33 $ (151,934.67) $ 838,465.33 $ 415,802.64
7 $ 990,400.00 $ 85,000.00 $ 905,400.00 $ (153,918.00) $ 836,482.00 $ 369,056.13
8 $ 990,400.00 $ 85,000.00 $ 905,400.00 $ (153,918.00) $ 836,482.00 $ 328,341.75
9 $ 990,400.00 $ 85,000.00 $ 905,400.00 $ (153,918.00) $ 836,482.00 $ 292,119.00
10 $ 990,400.00 $ 85,000.00 $ 905,400.00 $ (153,918.00) $ 836,482.00 $ 259,892.34
11 $ 990,400.00 $ 84,600.00 $ 905,800.00 $ (153,986.00) $ 836,414.00 $ 231,202.15
12 $ 990,400.00 $ 84,600.00 $ 905,800.00 $ (153,986.00) $ 836,414.00 $ 205,695.86
13 $ 990,400.00 $ 84,600.00 $ 905,800.00 $ (153,986.00) $ 836,414.00 $ 183,003.44
14 $ 990,400.00 $ 84,600.00 $ 905,800.00 $ (153,986.00) $ 836,414.00 $ 162,814.45
15 $ 990,400.00 $ 84,600.00 $ 905,800.00 $ (153,986.00) $ 836,414.00 $ 144,852.71
15 $ 3,713,000.00 $ - $ (133,000.00) $ 22,610.00 $ 3,735,610.00 $ 646,944.26
$ 426,872.07
Balancing Allowances or Charges
Market Value @
Initial Investments Book Value Charging/Balancing
End 15 yrs
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 (delivery
$ 8,000.00
vans) $ - $ 8,000.00
IT infrastructure $ - $ - $ -
$ 3,713,000.00 $ 3,846,000.00 $ (133,000.00)
 14

Tax=17% After Tax MARR= 12.40%

Fast Food Franchise operations
Income tax Cash After Tax Cash
End of the Year Before Tax Cash flow Depreciation Taxable Income PW of ATCF
Flow Flow
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) $ (2,456,000.00)
1 $ 453,800.00 $ 359,533.33 $ 94,266.67 $ (16,025.33) $ 437,774.67 $ 389,479.24
2 $ 453,800.00 $ 66,283.33 $ 387,516.67 $ (65,877.83) $ 387,922.17 $ 307,052.03
3 $ 453,800.00 $ 66,283.33 $ 387,516.67 $ (65,877.83) $ 387,922.17 $ 273,177.96
4 $ 453,800.00 $ 66,283.33 $ 387,516.67 $ (65,877.83) $ 387,922.17 $ 243,040.89
5 $ 453,800.00 $ 66,283.33 $ 387,516.67 $ (65,877.83) $ 387,922.17 $ 216,228.55
6 $ 453,800.00 $ 64,683.33 $ 389,116.67 $ (66,149.83) $ 387,650.17 $ 192,239.27
7 $ 453,800.00 $ 51,350.00 $ 402,450.00 $ (68,416.50) $ 385,383.50 $ 170,031.32
8 $ 453,800.00 $ 51,350.00 $ 402,450.00 $ (68,416.50) $ 385,383.50 $ 151,273.42
9 $ 453,800.00 $ 46,350.00 $ 407,450.00 $ (69,266.50) $ 384,533.50 $ 134,288.05
10 $ 453,800.00 $ 46,350.00 $ 407,450.00 $ (69,266.50) $ 384,533.50 $ 119,473.36
11 $ 453,800.00 $ 24,750.00 $ 429,050.00 $ (72,938.50) $ 380,861.50 $ 105,278.01
12 $ 453,800.00 $ 24,750.00 $ 429,050.00 $ (72,938.50) $ 380,861.50 $ 93,663.71
13 $ 453,800.00 $ 24,750.00 $ 429,050.00 $ (72,938.50) $ 380,861.50 $ 83,330.70
14 $ 453,800.00 $ 24,750.00 $ 429,050.00 $ (72,938.50) $ 380,861.50 $ 74,137.63
15 $ 453,800.00 $ 24,750.00 $ 429,050.00 $ (72,938.50) $ 380,861.50 $ 65,958.75
15 $ 1,200,000.00 $ (247,500.00) $ 42,075.00 $ 1,242,075.00 $ 215,106.31
$ 377,759.21
Balancing Allowances or Charges
Market Value @
Initial Investments Book Value Charging/Balancing
End 15 yrs
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 (motor
$ cycles)- $ - $ -
IT infrastructure $ - $ - $ -
$ 1,200,000.00 $ 1,447,500.00 $ (247,500.00)
 15

Tax=17% After Tax MARR= 12.40%

Cold Storage
Income tax Cash After Tax Cash
End of the Year Before Tax Cash flow Depreciation Taxable Income PW of ATCF
Flow Flow
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 $ 907,809.02
2 $ 1,035,700.00 $ 220,066.67 $ 815,633.33 $ (138,657.67) $ 897,042.33 $ 710,035.91
3 $ 1,035,700.00 $ 220,066.67 $ 815,633.33 $ (138,657.67) $ 897,042.33 $ 631,704.55
4 $ 1,035,700.00 $ 220,066.67 $ 815,633.33 $ (138,657.67) $ 897,042.33 $ 562,014.72
5 $ 1,035,700.00 $ 220,066.67 $ 815,633.33 $ (138,657.67) $ 897,042.33 $ 500,013.10
6 $ 1,035,700.00 $ 220,066.67 $ 815,633.33 $ (138,657.67) $ 897,042.33 $ 444,851.51
7 $ 1,035,700.00 $ 57,400.00 $ 978,300.00 $ (166,311.00) $ 869,389.00 $ 383,574.71
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 $ 303,610.89
10 $ 1,035,700.00 $ 57,400.00 $ 978,300.00 $ (166,311.00) $ 869,389.00 $ 270,116.45
11 $ 1,035,700.00 $ 54,000.00 $ 981,700.00 $ (166,889.00) $ 868,811.00 $ 240,157.35
12 $ 1,035,700.00 $ 54,000.00 $ 981,700.00 $ (166,889.00) $ 868,811.00 $ 213,663.13
13 $ 1,035,700.00 $ 54,000.00 $ 981,700.00 $ (166,889.00) $ 868,811.00 $ 190,091.75
14 $ 1,035,700.00 $ 54,000.00 $ 981,700.00 $ (166,889.00) $ 868,811.00 $ 169,120.77
15 $ 1,035,700.00 $ 54,000.00 $ 981,700.00 $ (166,889.00) $ 868,811.00 $ 150,463.32
15 $ 3,000,000.00 $ (540,000.00) $ 91,800.00 $ 3,091,800.00 $ 535,447.29
$ 468,433.10
Balancing Allowances or Charges
Market Value @
Initial Investments Book Value Charging/Balancing
End 15 yrs
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 (Containers)
$ - $ - $ -
IT infrastructure $ - $ - $ -
$ 3,000,000.00 $ 3,540,000.00 $ (540,000.00)

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.

Summary (ATCF Analysis)

Fast Food
FMCG Distribution Cold Storage
Franchise
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

Spider diagram for FMCG Distributorship (for After Tax PW)

$5,000,000.00
$4,500,000.00
$4,000,000.00
$3,500,000.00
$3,000,000.00
$2,500,000.00 Profit

$2,000,000.00 Sales
Afer-Tax PW

$1,500,000.00 Initial Investments

$1,000,000.00 Labor(Wages incl bonus)
$500,000.00
Salvage Value
$-
Fuel
$(500,000.00)
$(1,000,000.00) Electricity

$(1,500,000.00) Phone bills

$(2,000,000.00) Stationaries
$(2,500,000.00) Purchase
$(3,000,000.00)
$(3,500,000.00)

Input Value as % of Base Case

Tornado diagram for FMCG Distributorship (for After Tax PW)

Profit 10% 30%

Sales $6,796,800.00 $12,744,000.00

Initial Investments $8,873,250.00 $4,732,400.00

Labor(Wages incl bonus) $390,000.00 $208,000.00

Salvage Value $2,970,400.00 $5,569,500.00

Fuel $36,000.00 $19,200.00

Electricity $27,000.00 $14,400.00

Phone bills $4,500.00 $2,400.00

Stationaries $900.00 $480.00

Purchase $5,760,000.00
$10,800,000.00

Afer-Tax PW
 17

Afer-Tax PW
Corresponding Input Value Output Value Percent
Input Variable Low Output Base Case High Output Low Base High Swing Swing^2
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%
Initial 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 incl 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 bills $ 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%

Spider diagram for FMCG Distributorship (for IRR)

26.00%

24.00%

22.00%

20.00%

18.00% Profit
Sales
16.00%
After-Tax IRR

Initial Investments

14.00% Labor(Wages incl bonus)

Salvage Value
12.00% Fuel
Electricity
10.00%
Phone bills
8.00% Stationaries
Purchase
6.00%

4.00%

2.00%

Input Value as % of Base Case

 18

Tornado diagram for FMCG Distributorship (for IRR)

Profit 10% 30%

Sales $6,796,800.00 $12,744,000.00

Initial Investments $8,873,250.00 $4,732,400.00

Labor(Wages incl bonus) $390,000.00 $208,000.00

Salvage Value $2,970,400.00 $5,569,500.00

Fuel $36,000.00 $19,200.00

Electricity $27,000.00 $14,400.00

Phone bills $4,500.00 $2,400.00

Stationaries $900.00 $480.00

Purchase $10,800,000.00
$5,760,000.00

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%
After-Tax 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% 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 bills $ 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%

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.
 19

FMCG Distributorship Profit Vs After Tax PW

$16,000,000.00

$11,000,000.00
Afer-Tax PW

$6,000,000.00

$1,000,000.00

$(4,000,000.00)
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Profit

FMCG Distributorship Sales Vs After Tax PW

$1,500,000.00

$1,000,000.00

$500,000.00

$-
Afer-Tax PW

$(500,000.00)

$(1,000,000.00)

$(1,500,000.00)

$(2,000,000.00)

$(2,500,000.00)

Sales
 20

Break-Even Values of Sensitive Factors

Factors Break Even Point

FMCG product distributorship

Profit 17.000%

Sales $ 7,680,000.00

Fast Food Franchise Outlet Project

Spider Diagram for Fast Food Franchise (for PW)

$4,000,000.00

$3,000,000.00

$2,000,000.00

$1,000,000.00

$- Wastage
Profit
$(1,000,000.00) Sales
Afer-Tax PW

Initial Investments
$(2,000,000.00) Labor(Wages incl bonus)
Salvage Value
$(3,000,000.00) Electricity
Fuel
$(4,000,000.00) Phone bills
Stationaries

$(5,000,000.00) Purchase

$(6,000,000.00)

$(7,000,000.00)

$(8,000,000.00)
-100.0% 0.0% 100.0% 200.0% 300.0% 400.0% 500.0% 600.0%
Input Value as % of Base Case
 21

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

Wastage 50% 0%

Profit 10% 100%

Sales $1,776,000.00 $3,330,000.00

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

Labor(Wages incl bonus) $312,000.00 $166,400.00

Salvage Value $960,000.00 $1,800,000.00

Electricity $36,000.00 $19,200.00

Fuel $36,000.00 $19,200.00

Phone bills $14,400.00 $7,680.00

Stationaries $900.00 $480.00

Purchase $1,200,000.00
$2,250,000.00

Afer-Tax PW

Afer-Tax PW
Corresponding Input Value Output Value Percent
Input Variable Low Output Base Case High Output Low Base High Swing Swing^2
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%
Initial Investments $ 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 bills $ 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

Spider Diagram for Fast Food Franchise (for IRR)

35.00%

30.00%

25.00%

20.00%

Wastage
15.00%
Profit

10.00% Sales
After-Tax IRR

Initial Investments
5.00% Labor(Wages incl bonus)
Salvage Value
0.00% Electricity
Fuel
-5.00%
Phone bills

-10.00% Stationaries
Purchase
-15.00%

-20.00%

-25.00%
-100.0% 0.0% 100.0% 200.0% 300.0% 400.0% 500.0% 600.0%
Input Value as % of Base Case
 23

After-Tax IRR
Corresponding Input Value Output Value Percent
Input Variable Low Output Base Case High Output Low Base High Swing Swing^2
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%
Initial Investments $ 4,000,000.00 $ 2,456,000.00 $2,000,000.00 9.58% 17.06% 21.03% 11.45% 4.6%
Labor(Wages incl 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.

Fast Food Franchise Wastage Vs After Tax PW

$20,000,000.00

$-

$(20,000,000.00)

$(40,000,000.00)
Afer-Tax PW

$(60,000,000.00)

$(80,000,000.00)

$(100,000,000.00)

$(120,000,000.00)

$(140,000,000.00)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Wastage

Fast Food Franchise Profit Vs After Tax PW

$3,000,000.00

$2,000,000.00

$1,000,000.00
Afer-Tax PW

$-

$(1,000,000.00)

$(2,000,000.00)

$(3,000,000.00)

$(4,000,000.00)
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Profit
 25

Fast Food Franchise Sales Vs After Tax PW

$5,000,000.00

$4,000,000.00

$3,000,000.00
Afer-Tax PW

$2,000,000.00

$1,000,000.00

$-

$(1,000,000.00)

$(2,000,000.00)
$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
Sales

Break-Even Values of Sensitive Factors

Factors Break Even Point
Wastage 18.000%
Fast Food Franchise Outlet
Profit 51.000%
Sales $ 1,770,000.00
 26

Cold Storage Project

Spider Diagram for Cold Storage (for After Tax PW)

$10,000,000.00
$9,000,000.00
$8,000,000.00
$7,000,000.00
$6,000,000.00
Profit
$5,000,000.00
Sales
$4,000,000.00
$3,000,000.00 Wastage
Afer-Tax PW

$2,000,000.00 Initial Investments

$1,000,000.00
Labor(Wages incl bonus)
$-
Salvage Value
$(1,000,000.00)
$(2,000,000.00) Electricity
$(3,000,000.00) Fuel
$(4,000,000.00) Phone bills
$(5,000,000.00)
Stationaries
$(6,000,000.00)
Purchase
$(7,000,000.00)
$(8,000,000.00)

Input Value as % of Base Case

Tornado Diagram for Cold Storage (for After tax PW)

Profit 10% 100%

Sales $4,848,000.00 $9,090,000.00

Wastage 15% 5%

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

Labor(Wages incl bonus) $243,750.00 $130,000.00

Salvage Value $2,400,000.00 $4,500,000.00

Electricity $54,000.00 $28,800.00

Fuel $36,000.00 $19,200.00

Phone bills $1,800.00 $960.00

Stationaries $900.00 $480.00

Purchase $3,840,000.00
$7,200,000.00

Afer-Tax PW
 27

Afer-Tax PW
Corresponding Input Value Output Value Percent
Input Variable Low Output Base Case High Output Low Base High Swing Swing^2
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%
Initial 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 incl 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 bills $ 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%

Spider Diagram for Cold Storage (for IRR)

40.00%

35.00%

30.00%

25.00%
Profit

20.00% Sales
Wastage
After-Tax IRR

15.00% Initial Investments

Labor(Wages incl bonus)
10.00%
Salvage Value
Electricity
5.00%
Fuel

0.00% Phone bills

Stationaries
-5.00% Purchase

-10.00%

-15.00%

Input Value as % of Base Case

 28

Tornado Diagram for Cold Storage (for IRR)

Profit 10% 100%

Sales $4,848,000.00 $9,090,000.00

Wastage 15% 5%

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

Labor(Wages incl bonus) $243,750.00 $130,000.00

Salvage Value $2,400,000.00 $4,500,000.00

Electricity $54,000.00 $28,800.00

Fuel $36,000.00 $19,200.00

Phone bills $1,800.00 $960.00

Stationaries $900.00 $480.00

Purchase $3,840,000.00
$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%
After-Tax 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%
Initial Investments $ 7,000,000.00 $ 6,085,500.00 $5,000,000.00 11.29% 13.71% 17.51% 6.22% 1.7%
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 bills $ 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%

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.
 29

Cold Storage Profit Vs After Tax PW

$10,000,000.00

$8,000,000.00

$6,000,000.00

$4,000,000.00

$2,000,000.00
Afer-Tax PW

$-

$(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%
Profit

Cold Storage Sales Vs After Tax PW

$8,000,000.00

$6,000,000.00

$4,000,000.00
Afer-Tax PW

$2,000,000.00

$-

$(2,000,000.00)

$(4,000,000.00)

Sales
 30

Cold Storage Wastage Vs After Tax PW

$2,000,000.00

$1,000,000.00

$-

$(1,000,000.00)
Afer-Tax PW

$(2,000,000.00)

$(3,000,000.00)

$(4,000,000.00)

$(5,000,000.00)
4% 9% 14% 19% 24%
Wastage

Break-Even Values of Sensitive Factors

Factors Break Even Point
Profit 40.000%
Cold Storage
Sales $ 4,100,000.00
Wastage 11.000%
 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

FMCG Distributorship - Histogram

3000

2500

2000
Frequency

1500

1000

500

Afer-Tax PW

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

FMCG Distributorship- Cumulative Chart

1.0
0.9
0.8
Cumulative Probability

0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0

Afer-Tax PW

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

FMCG Distributorship - Histogram

6000

5000

4000
Frequency

3000

2000

1000

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

Mean 12.18%
St. Dev. 5.98%
Mean St. Error 0.03%
Minimum -7.06%
First Quartile 8.00%
Median 11.65%
Third Quartile 15.84%
Maximum 42.71%
Skewness 0.5065
 34

FMCG Distributorship Cumulative Chart

1.0

0.9

0.8
Cumulative Probability

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0
-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

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 Parameters

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

Fast Food - Histogram

7000

6000

5000
Frequency

4000

3000

2000

1000

Afer-Tax PW

Mean $ (111,672.21)
St. Dev. $ 1,686,809.27
Mean St. Error $ 10,668.32
Minimum $ (13,782,045.41)
First Quartile $ (1,080,892.94)
Median $ 15,523.10
Third Quartile $ 1,023,029.27
Maximum $ 5,780,026.86
Skewness -0.6730
 36

Fast Food - Cumulative Chart

1.0
0.9
0.8
Cumulative Probability

0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0

Afer-Tax PW

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 Variables Distribution Parameters

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

Cold Storage - Histogram

14000

12000

10000
Frequency

8000

6000

4000

2000

Afer-Tax PW

Mean $ (212,512.83)
St. Dev. $ 5,102,515.50
Mean St. Error $ 28,523.93
Minimum $ (51,512,295.20)
First Quartile $ (2,945,961.22)
Median $ 281,427.87
Third Quartile $ 3,161,496.71
Maximum $ 16,987,256.00
Skewness -0.9760
 38

Cold Storage - Cumulative Chart

1.0
0.9
0.8
Cumulative Probability

0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0

Afer-Tax PW

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

Cold Storage- Histogram

7000

6000

5000
Frequency

4000

3000

2000

1000

0
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%
After-Tax IRR

Mean 29.00%
St. Dev. 7.77%
Mean St. Error 0.05%
Minimum 5.85%
First Quartile 23.41%
Median 28.35%
Third Quartile 33.99%
Maximum 66.38%
Skewness 0.4216

Cold Storage - Cumulative Chart

1.0

0.9

0.8
Cumulative Probability

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%
After-Tax IRR
 40

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%

Results for Probabilistic Analysis

Probabilistic Analysis Results

Parameters Values Remarks
Mean $ (280,193.00)
FMCG distributorship High Risk Project with negetive
Std Deviation $ 2,460,749.00 mean
Prob (PW =< 0) ~ 55.000%

Parameters Values Remarks

Mean $ (111,672.00)
Fast Food Franchise Outlet High Risk Project with negetive
Std Deviation $ 1,686,809.00 mean
Prob (PW =< 0) ~ 45.000%

Parameters Values Remarks

Mean $ (212,512.00)
Cold Storage High Risk Project with negetive
Std Deviation $ 5,102,515.00 mean
Prob (PW =< 0) ~ 45.000%

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

 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

Cold Storage - Spider Diagram under What if Condiation
12.00%

11.00%

10.00%

9.00%

Sales
8.00%
Profit
Initial Investments
After-Tax IRR

7.00%
Labor(Wages incl bonus)
Salvage Value
6.00% Wastage
Electricity
5.00% Fuel
Phone bills

4.00% Stationaries
Purchase

3.00%

2.00%

1.00%

Input Value as % of Base Case

 42

Cold Storage - Tornado Diagram under What if Condiation

Sales$1,600,000.00 $3,000,000.00

Profit 50% 100%

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

Labor(Wages incl bonus) $243,750.00 $130,000.00

Salvage Value $2,400,000.00 $4,500,000.00

Wastage 10% 5%

Electricity $54,000.00 $28,800.00

Fuel $36,000.00 $19,200.00

Phone bills $1,800.00 $960.00

Stationaries $900.00 $480.00

Purchase $3,840,000.00
$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%
After-Tax IRR

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%
Initial Investments $ 7,000,000.00 $ 6,085,500.00 $5,000,000.00 2.97% 4.54% 6.93% 3.96% 12.6%
Labor(Wages incl 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

Cold Storage - Histogram Under What if Condition

9000

8000

7000

6000
Frequency

5000

4000

3000

2000

1000

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

1.0

0.9

0.8

0.7
Cumulative Probability

0.6

0.5

0.4

0.3

0.2

0.1

0.0
-10.00% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00%
After-Tax IRR
 44

Mean 26.24%
St. Dev. 7.65%
Mean St. Error 0.04%
Minimum -8.16%
First Quartile 20.90%
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

Fast Food - Spider Diagram-Under What if Condition

$4,000,000.00

$3,500,000.00

$3,000,000.00
Sales
$2,500,000.00
Profit
$2,000,000.00
Initial Investments
Afer-Tax PW

$1,500,000.00 Labor(Wages incl bonus)

Wastage
$1,000,000.00
Salvage Value
$500,000.00 Electricity

$- Fuel
Phone bills
$(500,000.00)
Stationaries
$(1,000,000.00) Purchase

$(1,500,000.00)

Input Value as % of Base Case

Fast Food - Tornado Diagram-Under What if Condition

Sales $1,776,000.00 $3,330,000.00

Profit 50.00% 100.00%

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

Labor(Wages incl bonus) $312,000.00 $166,400.00

Wastage 10.00% 5.00%

Salvage Value $3,240,000.00 $6,075,000.00

Electricity $36,000.00 $19,200.00

Fuel $36,000.00 $19,200.00

Phone bills $14,400.00 $7,680.00

Stationaries $900.00 $480.00

Purchase $1,200,000.00
$2,250,000.00

Afer-Tax PW
 46

Afer-Tax PW
Corresponding Input Value Output Value Percent
Input Variable Low Output Base Case High Output Low Base High Swing Swing^2
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%
Initial 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 incl 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 bills $ 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%

Fast Food - Histogram Under What if Condition

6000

5000

4000
Frequency

3000

2000

1000

Afer-Tax PW

Mean $ 44,844.34
St. Dev. $ 1,153,969.99
Mean St. Error $ 6,450.89
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

Fast Food - Cumulative Chart Under What if Condition

1.0

0.9

0.8
Cumulative Probability

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

Afer-Tax PW

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

Fast Food - Histogram under What if Condition

5000

4500

4000

3500

3000
Frequency

2500

2000

1500

1000

500

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

Mean 13.03%
St. Dev. 7.10%
Mean St. Error 0.04%
Minimum -14.49%
First Quartile 8.08%
Median 12.48%
Third Quartile 17.40%
Maximum 49.35%
Skewness 0.4140
 49

Fast Food - Cumulative Chart

under What if Condition
1.0

0.9

0.8

0.7
Cumulative Probability

0.6

0.5

0.4

0.3

0.2

0.1

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% 45.00% 50.00%
After-Tax IRR

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:

What If condition Results
Parameters Values Remarks
Mean $ 5,027,304.00
Cold Storage Low Risk Project with large
Std Deviation $ 2,728,403.00 mean
Prob (PW =< 0) ~ 2.000%

Parameters Values Remarks

Mean $ 44,844.00
Fast Food Franchise Outlet
Std Deviation $ 1,153,969.00 High Risk Project with low mean
Prob (PW =< 0) ~ 40.000%

Result: Cold Storage Project is become profitable and low risk

 51

Recommendations & Conclusion

Cold Storage Project seems to be more profitable among three but with risk involved. If Mr X is Risk
seeking 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***