The financial analysis is based on calculations of standard viability indicators.
Standard Viability Indicators
• Financial Internal Rate of Return (FIRR)
• Weighted Average Cost of Capital (WACC)
• Internal Rate of Return on Equity (IRR Equity)
• Net Present Value on Project (NPV)
• Net Present Value on Equity, after financing (NPV Equity)
• Payback Period, after tax
The FIRR and the NPV are measures of the financial feasibility of the project. The WACC is a benchmark used to evaluate the profitability of the proposed investment against alternative investment opportunities. The FIRR should be at least as high as the WACC in order for the project to be considered feasible.
The IRR on Equity and the NPV on Equity are of particular interest to the proponent since they are measures of the return of proponent's equity. This value helps the proponent to determine the optimum combination of debt and personal equity investment. The payback period after tax helps the LGU and the proponent determine whether any tax incentives are necessary.
Table 3-6: Assumptions for the Public Market
Revenue Rental Space - Ground floor Rental Space - Other floors Rent - Ground Floor Rent - Other Floors Annual Increase in Rent Fee |
1,390 8,468 600 500 5% | Comments Square meter Square meter Pesos/square meter/month Pesos/square meter/month | |
Annual Expenses Months in Operation Security Janitorial Increase in Expenses Administration |
12 180,000 72,000 5% 67,200 67,200 |
Monthly Personnel Calculation: 6,000 x 30 Calculation: 4,000 x 18 | |
Calculation: |
________2 Managers | ||
Equipment Maintenance Utilities Supplies Depreciation, Building Depreciation, Equipment Income Tax Rate | 11,200 34,120 11,200 173.44 36.42 30% | Straight-line, 20 years | |
Project Cost Capitalized Interest Land Acquisition Site Works Sewer Plant, Well and Storage Tank Market Commercial Center Equipment Project life in years | 402,524,080 34,502,06 0 12,976,920 46,029,680 40,745,540 281,512,380 61,259,560 20 | % Increase in Public Market 0.00% | |