topic included: 1.financial analysis fundamental 2.simple financial model building 3.project...
TRANSCRIPT
Topic Included
1 Financial Analysis
Fundamental
2 Simple Financial Model
Building
3 Project Decision Analysis
4 Share Key Ideas from
Seminar
Nuttakul SomakettarinSpecial Project Team
21 May 2015
1 Financial Analysis Fundamental
Capital Budgeting is the process of determining which real investment projects should be accepted and given an allocation of funds from the firm
Capital Budgeting คอ กระบวนการคดสรรการลงทนในโครงการ จากการวเคราะหผลตอบแทนทเหมาะสม
WHAT IS CAPITAL BUDGETING
I CAPITAL IS A LIMITED RESOURCE
II Basic Steps of Capital Budgeting
1 Estimate the cash flows
2 Assess the riskiness of the cash flows
3 Determine the appropriate discount
rate
4 Find the PV of the expected cash flows
5 Accept the project if
- PV of inflows gt costs
- IRR gt Hurdle Rate
- andor payback lt policy
1 Financial Analysis Fundamental
Tools and Concepts behind the Capital Budgeting
Time Value of
Money
DCF(Discounted Cash Flows)
Measurements
NPVIRR
PaybackEtc
1 Financial Analysis Fundamental
III Evaluation Techniques
A Payback period
B Net present value (NPV)
C Internal rate of return (IRR)
D Modified internal rate of return (MIRR)
E Profitability index
1 Financial Analysis Fundamental
Payback L = 2 + $30$80 years = 24 yearsPayback S = 16 years
Weaknesses of Payback1 Ignores the time value of
money This weakness is eliminated with the discounted payback method
2 Ignores cash flows occurring after the payback period
A PAYBACK PERIOD Payback period = Expected number of years required to recover a projectrsquos cost
1 Financial Analysis Fundamental
B NET PRESENT VALUE
10=KDiscount Factor
Discounted CF
100 -100110 909 121 4959 133 6011
NPV = 1879
NPVS = $1998
If the projects are independent accept bothIf the projects are mutually exclusive accept Project S since NPVS gt NPVL
1 Financial Analysis Fundamental
C INTERNAL RATE OF RETURN
IRRL = 181IRRS = 236
If the projects are independent accept both because IRR gt k ( 10)If the projects are mutually exclusive accept Project S since IRRS gt IRRL
1 Financial Analysis Fundamental
WACC calculation
KE หรอ Cost of Equity สามารถคานวนหาไดจาก CAPM (Capital Asset Pricing Model)
1 Financial Analysis Fundamental
WACC calculation
KD หรอ Cost of Debt สามารถหาไดจากตนทน(ดอกเบ$ย cost of borrowing) เงนกampทจะนามาใชในการ Financing โครงการน$นๆ
1 Financial Analysis Fundamental
WACC calculation
1048657 Equitybull Cost of Equity = Riskfree rate + Beta Risk Premium
= 4 + 12 (7) = 124bull Market Value of Equity = 700000bull Equity(Debt+Equity) = 70
1048657 Debtbull After-tax Cost of debt = (Interest Rate for the Loan) (1-
t) = (6) (1-25) = 45
bull Market Value of Debt = 300000bull Debt(Debt +Equity) = 30
1048657 Cost of Capital = 124(70) + 45(30) = 1003
1 Financial Analysis Fundamental
2 Simple Financial Model Building
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
1 Financial Analysis Fundamental
Capital Budgeting is the process of determining which real investment projects should be accepted and given an allocation of funds from the firm
Capital Budgeting คอ กระบวนการคดสรรการลงทนในโครงการ จากการวเคราะหผลตอบแทนทเหมาะสม
WHAT IS CAPITAL BUDGETING
I CAPITAL IS A LIMITED RESOURCE
II Basic Steps of Capital Budgeting
1 Estimate the cash flows
2 Assess the riskiness of the cash flows
3 Determine the appropriate discount
rate
4 Find the PV of the expected cash flows
5 Accept the project if
- PV of inflows gt costs
- IRR gt Hurdle Rate
- andor payback lt policy
1 Financial Analysis Fundamental
Tools and Concepts behind the Capital Budgeting
Time Value of
Money
DCF(Discounted Cash Flows)
Measurements
NPVIRR
PaybackEtc
1 Financial Analysis Fundamental
III Evaluation Techniques
A Payback period
B Net present value (NPV)
C Internal rate of return (IRR)
D Modified internal rate of return (MIRR)
E Profitability index
1 Financial Analysis Fundamental
Payback L = 2 + $30$80 years = 24 yearsPayback S = 16 years
Weaknesses of Payback1 Ignores the time value of
money This weakness is eliminated with the discounted payback method
2 Ignores cash flows occurring after the payback period
A PAYBACK PERIOD Payback period = Expected number of years required to recover a projectrsquos cost
1 Financial Analysis Fundamental
B NET PRESENT VALUE
10=KDiscount Factor
Discounted CF
100 -100110 909 121 4959 133 6011
NPV = 1879
NPVS = $1998
If the projects are independent accept bothIf the projects are mutually exclusive accept Project S since NPVS gt NPVL
1 Financial Analysis Fundamental
C INTERNAL RATE OF RETURN
IRRL = 181IRRS = 236
If the projects are independent accept both because IRR gt k ( 10)If the projects are mutually exclusive accept Project S since IRRS gt IRRL
1 Financial Analysis Fundamental
WACC calculation
KE หรอ Cost of Equity สามารถคานวนหาไดจาก CAPM (Capital Asset Pricing Model)
1 Financial Analysis Fundamental
WACC calculation
KD หรอ Cost of Debt สามารถหาไดจากตนทน(ดอกเบ$ย cost of borrowing) เงนกampทจะนามาใชในการ Financing โครงการน$นๆ
1 Financial Analysis Fundamental
WACC calculation
1048657 Equitybull Cost of Equity = Riskfree rate + Beta Risk Premium
= 4 + 12 (7) = 124bull Market Value of Equity = 700000bull Equity(Debt+Equity) = 70
1048657 Debtbull After-tax Cost of debt = (Interest Rate for the Loan) (1-
t) = (6) (1-25) = 45
bull Market Value of Debt = 300000bull Debt(Debt +Equity) = 30
1048657 Cost of Capital = 124(70) + 45(30) = 1003
1 Financial Analysis Fundamental
2 Simple Financial Model Building
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
II Basic Steps of Capital Budgeting
1 Estimate the cash flows
2 Assess the riskiness of the cash flows
3 Determine the appropriate discount
rate
4 Find the PV of the expected cash flows
5 Accept the project if
- PV of inflows gt costs
- IRR gt Hurdle Rate
- andor payback lt policy
1 Financial Analysis Fundamental
Tools and Concepts behind the Capital Budgeting
Time Value of
Money
DCF(Discounted Cash Flows)
Measurements
NPVIRR
PaybackEtc
1 Financial Analysis Fundamental
III Evaluation Techniques
A Payback period
B Net present value (NPV)
C Internal rate of return (IRR)
D Modified internal rate of return (MIRR)
E Profitability index
1 Financial Analysis Fundamental
Payback L = 2 + $30$80 years = 24 yearsPayback S = 16 years
Weaknesses of Payback1 Ignores the time value of
money This weakness is eliminated with the discounted payback method
2 Ignores cash flows occurring after the payback period
A PAYBACK PERIOD Payback period = Expected number of years required to recover a projectrsquos cost
1 Financial Analysis Fundamental
B NET PRESENT VALUE
10=KDiscount Factor
Discounted CF
100 -100110 909 121 4959 133 6011
NPV = 1879
NPVS = $1998
If the projects are independent accept bothIf the projects are mutually exclusive accept Project S since NPVS gt NPVL
1 Financial Analysis Fundamental
C INTERNAL RATE OF RETURN
IRRL = 181IRRS = 236
If the projects are independent accept both because IRR gt k ( 10)If the projects are mutually exclusive accept Project S since IRRS gt IRRL
1 Financial Analysis Fundamental
WACC calculation
KE หรอ Cost of Equity สามารถคานวนหาไดจาก CAPM (Capital Asset Pricing Model)
1 Financial Analysis Fundamental
WACC calculation
KD หรอ Cost of Debt สามารถหาไดจากตนทน(ดอกเบ$ย cost of borrowing) เงนกampทจะนามาใชในการ Financing โครงการน$นๆ
1 Financial Analysis Fundamental
WACC calculation
1048657 Equitybull Cost of Equity = Riskfree rate + Beta Risk Premium
= 4 + 12 (7) = 124bull Market Value of Equity = 700000bull Equity(Debt+Equity) = 70
1048657 Debtbull After-tax Cost of debt = (Interest Rate for the Loan) (1-
t) = (6) (1-25) = 45
bull Market Value of Debt = 300000bull Debt(Debt +Equity) = 30
1048657 Cost of Capital = 124(70) + 45(30) = 1003
1 Financial Analysis Fundamental
2 Simple Financial Model Building
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
Tools and Concepts behind the Capital Budgeting
Time Value of
Money
DCF(Discounted Cash Flows)
Measurements
NPVIRR
PaybackEtc
1 Financial Analysis Fundamental
III Evaluation Techniques
A Payback period
B Net present value (NPV)
C Internal rate of return (IRR)
D Modified internal rate of return (MIRR)
E Profitability index
1 Financial Analysis Fundamental
Payback L = 2 + $30$80 years = 24 yearsPayback S = 16 years
Weaknesses of Payback1 Ignores the time value of
money This weakness is eliminated with the discounted payback method
2 Ignores cash flows occurring after the payback period
A PAYBACK PERIOD Payback period = Expected number of years required to recover a projectrsquos cost
1 Financial Analysis Fundamental
B NET PRESENT VALUE
10=KDiscount Factor
Discounted CF
100 -100110 909 121 4959 133 6011
NPV = 1879
NPVS = $1998
If the projects are independent accept bothIf the projects are mutually exclusive accept Project S since NPVS gt NPVL
1 Financial Analysis Fundamental
C INTERNAL RATE OF RETURN
IRRL = 181IRRS = 236
If the projects are independent accept both because IRR gt k ( 10)If the projects are mutually exclusive accept Project S since IRRS gt IRRL
1 Financial Analysis Fundamental
WACC calculation
KE หรอ Cost of Equity สามารถคานวนหาไดจาก CAPM (Capital Asset Pricing Model)
1 Financial Analysis Fundamental
WACC calculation
KD หรอ Cost of Debt สามารถหาไดจากตนทน(ดอกเบ$ย cost of borrowing) เงนกampทจะนามาใชในการ Financing โครงการน$นๆ
1 Financial Analysis Fundamental
WACC calculation
1048657 Equitybull Cost of Equity = Riskfree rate + Beta Risk Premium
= 4 + 12 (7) = 124bull Market Value of Equity = 700000bull Equity(Debt+Equity) = 70
1048657 Debtbull After-tax Cost of debt = (Interest Rate for the Loan) (1-
t) = (6) (1-25) = 45
bull Market Value of Debt = 300000bull Debt(Debt +Equity) = 30
1048657 Cost of Capital = 124(70) + 45(30) = 1003
1 Financial Analysis Fundamental
2 Simple Financial Model Building
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
III Evaluation Techniques
A Payback period
B Net present value (NPV)
C Internal rate of return (IRR)
D Modified internal rate of return (MIRR)
E Profitability index
1 Financial Analysis Fundamental
Payback L = 2 + $30$80 years = 24 yearsPayback S = 16 years
Weaknesses of Payback1 Ignores the time value of
money This weakness is eliminated with the discounted payback method
2 Ignores cash flows occurring after the payback period
A PAYBACK PERIOD Payback period = Expected number of years required to recover a projectrsquos cost
1 Financial Analysis Fundamental
B NET PRESENT VALUE
10=KDiscount Factor
Discounted CF
100 -100110 909 121 4959 133 6011
NPV = 1879
NPVS = $1998
If the projects are independent accept bothIf the projects are mutually exclusive accept Project S since NPVS gt NPVL
1 Financial Analysis Fundamental
C INTERNAL RATE OF RETURN
IRRL = 181IRRS = 236
If the projects are independent accept both because IRR gt k ( 10)If the projects are mutually exclusive accept Project S since IRRS gt IRRL
1 Financial Analysis Fundamental
WACC calculation
KE หรอ Cost of Equity สามารถคานวนหาไดจาก CAPM (Capital Asset Pricing Model)
1 Financial Analysis Fundamental
WACC calculation
KD หรอ Cost of Debt สามารถหาไดจากตนทน(ดอกเบ$ย cost of borrowing) เงนกampทจะนามาใชในการ Financing โครงการน$นๆ
1 Financial Analysis Fundamental
WACC calculation
1048657 Equitybull Cost of Equity = Riskfree rate + Beta Risk Premium
= 4 + 12 (7) = 124bull Market Value of Equity = 700000bull Equity(Debt+Equity) = 70
1048657 Debtbull After-tax Cost of debt = (Interest Rate for the Loan) (1-
t) = (6) (1-25) = 45
bull Market Value of Debt = 300000bull Debt(Debt +Equity) = 30
1048657 Cost of Capital = 124(70) + 45(30) = 1003
1 Financial Analysis Fundamental
2 Simple Financial Model Building
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
Payback L = 2 + $30$80 years = 24 yearsPayback S = 16 years
Weaknesses of Payback1 Ignores the time value of
money This weakness is eliminated with the discounted payback method
2 Ignores cash flows occurring after the payback period
A PAYBACK PERIOD Payback period = Expected number of years required to recover a projectrsquos cost
1 Financial Analysis Fundamental
B NET PRESENT VALUE
10=KDiscount Factor
Discounted CF
100 -100110 909 121 4959 133 6011
NPV = 1879
NPVS = $1998
If the projects are independent accept bothIf the projects are mutually exclusive accept Project S since NPVS gt NPVL
1 Financial Analysis Fundamental
C INTERNAL RATE OF RETURN
IRRL = 181IRRS = 236
If the projects are independent accept both because IRR gt k ( 10)If the projects are mutually exclusive accept Project S since IRRS gt IRRL
1 Financial Analysis Fundamental
WACC calculation
KE หรอ Cost of Equity สามารถคานวนหาไดจาก CAPM (Capital Asset Pricing Model)
1 Financial Analysis Fundamental
WACC calculation
KD หรอ Cost of Debt สามารถหาไดจากตนทน(ดอกเบ$ย cost of borrowing) เงนกampทจะนามาใชในการ Financing โครงการน$นๆ
1 Financial Analysis Fundamental
WACC calculation
1048657 Equitybull Cost of Equity = Riskfree rate + Beta Risk Premium
= 4 + 12 (7) = 124bull Market Value of Equity = 700000bull Equity(Debt+Equity) = 70
1048657 Debtbull After-tax Cost of debt = (Interest Rate for the Loan) (1-
t) = (6) (1-25) = 45
bull Market Value of Debt = 300000bull Debt(Debt +Equity) = 30
1048657 Cost of Capital = 124(70) + 45(30) = 1003
1 Financial Analysis Fundamental
2 Simple Financial Model Building
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
B NET PRESENT VALUE
10=KDiscount Factor
Discounted CF
100 -100110 909 121 4959 133 6011
NPV = 1879
NPVS = $1998
If the projects are independent accept bothIf the projects are mutually exclusive accept Project S since NPVS gt NPVL
1 Financial Analysis Fundamental
C INTERNAL RATE OF RETURN
IRRL = 181IRRS = 236
If the projects are independent accept both because IRR gt k ( 10)If the projects are mutually exclusive accept Project S since IRRS gt IRRL
1 Financial Analysis Fundamental
WACC calculation
KE หรอ Cost of Equity สามารถคานวนหาไดจาก CAPM (Capital Asset Pricing Model)
1 Financial Analysis Fundamental
WACC calculation
KD หรอ Cost of Debt สามารถหาไดจากตนทน(ดอกเบ$ย cost of borrowing) เงนกampทจะนามาใชในการ Financing โครงการน$นๆ
1 Financial Analysis Fundamental
WACC calculation
1048657 Equitybull Cost of Equity = Riskfree rate + Beta Risk Premium
= 4 + 12 (7) = 124bull Market Value of Equity = 700000bull Equity(Debt+Equity) = 70
1048657 Debtbull After-tax Cost of debt = (Interest Rate for the Loan) (1-
t) = (6) (1-25) = 45
bull Market Value of Debt = 300000bull Debt(Debt +Equity) = 30
1048657 Cost of Capital = 124(70) + 45(30) = 1003
1 Financial Analysis Fundamental
2 Simple Financial Model Building
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
C INTERNAL RATE OF RETURN
IRRL = 181IRRS = 236
If the projects are independent accept both because IRR gt k ( 10)If the projects are mutually exclusive accept Project S since IRRS gt IRRL
1 Financial Analysis Fundamental
WACC calculation
KE หรอ Cost of Equity สามารถคานวนหาไดจาก CAPM (Capital Asset Pricing Model)
1 Financial Analysis Fundamental
WACC calculation
KD หรอ Cost of Debt สามารถหาไดจากตนทน(ดอกเบ$ย cost of borrowing) เงนกampทจะนามาใชในการ Financing โครงการน$นๆ
1 Financial Analysis Fundamental
WACC calculation
1048657 Equitybull Cost of Equity = Riskfree rate + Beta Risk Premium
= 4 + 12 (7) = 124bull Market Value of Equity = 700000bull Equity(Debt+Equity) = 70
1048657 Debtbull After-tax Cost of debt = (Interest Rate for the Loan) (1-
t) = (6) (1-25) = 45
bull Market Value of Debt = 300000bull Debt(Debt +Equity) = 30
1048657 Cost of Capital = 124(70) + 45(30) = 1003
1 Financial Analysis Fundamental
2 Simple Financial Model Building
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
WACC calculation
KE หรอ Cost of Equity สามารถคานวนหาไดจาก CAPM (Capital Asset Pricing Model)
1 Financial Analysis Fundamental
WACC calculation
KD หรอ Cost of Debt สามารถหาไดจากตนทน(ดอกเบ$ย cost of borrowing) เงนกampทจะนามาใชในการ Financing โครงการน$นๆ
1 Financial Analysis Fundamental
WACC calculation
1048657 Equitybull Cost of Equity = Riskfree rate + Beta Risk Premium
= 4 + 12 (7) = 124bull Market Value of Equity = 700000bull Equity(Debt+Equity) = 70
1048657 Debtbull After-tax Cost of debt = (Interest Rate for the Loan) (1-
t) = (6) (1-25) = 45
bull Market Value of Debt = 300000bull Debt(Debt +Equity) = 30
1048657 Cost of Capital = 124(70) + 45(30) = 1003
1 Financial Analysis Fundamental
2 Simple Financial Model Building
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
WACC calculation
KD หรอ Cost of Debt สามารถหาไดจากตนทน(ดอกเบ$ย cost of borrowing) เงนกampทจะนามาใชในการ Financing โครงการน$นๆ
1 Financial Analysis Fundamental
WACC calculation
1048657 Equitybull Cost of Equity = Riskfree rate + Beta Risk Premium
= 4 + 12 (7) = 124bull Market Value of Equity = 700000bull Equity(Debt+Equity) = 70
1048657 Debtbull After-tax Cost of debt = (Interest Rate for the Loan) (1-
t) = (6) (1-25) = 45
bull Market Value of Debt = 300000bull Debt(Debt +Equity) = 30
1048657 Cost of Capital = 124(70) + 45(30) = 1003
1 Financial Analysis Fundamental
2 Simple Financial Model Building
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
WACC calculation
1048657 Equitybull Cost of Equity = Riskfree rate + Beta Risk Premium
= 4 + 12 (7) = 124bull Market Value of Equity = 700000bull Equity(Debt+Equity) = 70
1048657 Debtbull After-tax Cost of debt = (Interest Rate for the Loan) (1-
t) = (6) (1-25) = 45
bull Market Value of Debt = 300000bull Debt(Debt +Equity) = 30
1048657 Cost of Capital = 124(70) + 45(30) = 1003
1 Financial Analysis Fundamental
2 Simple Financial Model Building
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
2 Simple Financial Model Building
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
INPUT SHEET USER ENTERS ALL BOLD NUMBERS
INITIAL INVESTMENT CASHFLOW DETAILS DISCOUNT RATE
Initial Investment= 1000000 Revenues in year 1= 600000 Approach(1Direct2CAPM)= 2
Opportunity cost (if any)= 0 Var Expenses as of Rev= 50 1 Discount rate = 10
Lifetime of the investment 10 Fixed expenses in year 1= 80000 2a Beta 12
Salvage Value at end of project= 10000 Tax rate on net income= 25 b Riskless rate= 400
Deprec method(1Stline2DDB)= 1 If you do not have the breakdown of fixed and variable c Market risk premium = 700
Tax Credit (if any )= 0 expenses input the entire expense as a of revenues d Debt Ratio = 3000
Other invest(non-depreciable)= 0 e Cost of Borrowing = 600
Discount rate used= 1003
WORKING CAPITAL
Initial Investment in Work Cap= 10000
Working Capital as of Rev= 25
Salvageable fraction at end= 100
GROWTH RATES
1 2 3 4 5 6 7 8 9 10
Revenues Do not enter 1000 1000 1000 1000 000 000 000 000 000
Fixed Expenses Do not enter 500 500 500 500 500 500 500 500 500
Default The fixed expense growth rate is set equal to the growth rate in revenues by default
2 Simple Financial Model Building
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
Year 0 1 2 3 4 5 6 7 8 9 10INITIAL INVESTMENTInvestment 1000000 - Tax Credit 0Net Investment 1000000 + Working Cap 10000 + Other invest 0Initial Investment 1010000
SALVAGE VALUEEquipment 0 0 0 0 0 0 0 0 0 10000Working Capital 0 0 0 0 0 0 0 0 0 219615
Year 0 1 2 3 4 5 6 7 8 9 10OPERATING CASHFLOWSRevenues 600000 660000 726000 798600 878460 878460 878460 878460 878460 878460 -Var Expenses 300000 330000 363000 399300 439230 439230 439230 439230 439230 439230 - Fixed Expenses 80000 84000 88200 92610 97241 102103 107208 112568 118196 124106EBITDA 220000 246000 274800 306690 341990 337127 332022 326662 321034 315124 - Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000EBIT 121000 147000 175800 207690 242990 238127 233022 227662 222034 216124 -Tax 30250 36750 43950 51923 60747 59532 58256 56915 55508 54031EBIT(1-t) 90750 110250 131850 155768 182242 178596 174767 170746 166525 162093 + Depreciation 99000 99000 99000 99000 99000 99000 99000 99000 99000 99000 - part Work Cap 140000 155000 (123500) 18150 19965 0 0 0 0 0NATCF (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 261093NATCF(with Salv) (1010000) 49750 54250 354350 236618 261277 277596 273767 269746 265525 490708Discount Factor 1 1100 1211 1332 1466 1613 1774 1952 2148 2364 2601Discounted CF (1010000) 45215 44810 266011 161437 162011 156439 140218 125565 112333 188674
Investment MeasuresNPV = 392712IRR = 1661
2 Simple Financial Model Building
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
A MAKING GONO-GO PROJECT DECISION
1 Focus on cash flows not
profits
2 Focus on incremental cash
flows
3 Account for time Time is
money
4 Account for risk
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
B THE PROCESS OF PROJECT EVALUATION
1 Carefully estimate expected
future cash flows
2 Select a discount rate
consistent with the risk of
those future cash flows
3 Compute a ldquobase-caserdquo NPV
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
B THE PROCESS OF PROJECT EVALUATION
4 Identify risks and uncertainties
Run a sensitivity analysis
- Identify ldquokey value driversrdquo
- Identify break-even
assumptions
- Estimate scenario values
- Bound the range of value
3 Project Decision Analysis
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
B THE PROCESS OF PROJECT EVALUATION
5 Identify qualitative issues
- Flexibility
- Quality
- Know-how
- Learning
6 Decide
3 Project Decision Analysis
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
4 Share Key Info from Seminar
Topic Project Investment and Feasibility Studies
9 ndash 10 February 2015
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
WACC by Sector (Thai Market)
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
Project Feasibility from Banking Perspective
Project Financing is all about lsquorisks allocation and mitigationrsquo
Step 1 Risk Identification and analysis
bull Cost analysisbull Cash flows
Step 2 Risk Allocation
bull Allocated by the parties through negotiation of the contractual framework
Step 3 Risk Management
bull Involved and monitor project closelybull Reporting obligations on the borrower
4 Share Key Info from Seminar
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
Project Feasibility from Banking Perspective
Key Financial Evaluation for Project Financing DebtTools Details
Project Feasibility bull Project Technical feasibilitybull Project Financial feasibilitybull Project IRR (to look whether it makes
sense)bull Equity IRR
Debt Coverage Ratio
bull DCSR to understand the level of cushion to lenders
bull DE ratio (varied with the nature of the project)
Financial Sensitivity Analysis
bull To evaluate the Projectrsquos tolerance level to adverse changes in lsquoCash flows Assumptionrsquo such as Project Costs Delays Drop in Revenues amp etc
bull Normally banks will have 3 main cashflow scenarios (Client case Bank case Worse Case)
4 Share Key Info from Seminar
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
BCG Approach to Minimizing CapEx needed
1 Capex Optimization
o Implementation of Cost-focus culture not the Cost-reduction
culture
2 Organization Set-Up
o Set a Cost oriented structure
3 Monitor of Performance
o Set up a dashboard to solve the cost problem (ex Project delay
amp Cost overrun)
4 Share Key Info from Seminar
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
Types of Investors
MampA perspectives
1 Strategic Investor
2 FinancialInvestor
Definition amp Investment Criteria
bull Long-term business planbull Enhance existing
operationsbull Willing to pay for readily
realizable synergies
bull Interested in Returnbull Well-managed company
with a history of consistent earning
bull Private equity funds and Venture capital funds
Examples
4 Share Key Info from Seminar
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
Only about 30-40 of the worldrsquos MampAsare value accretive
MampA Successful
Deals
Good Deals butPoor
Implementation
MampA Bad Deals
Source Mckinsey
Weak strategic fit Unrealistic synergies Price too high
Disciplined transactionprocess
Clear deal strategy Excel in post-deal execution
with adequate resources tomanage the Post-Integration
Poor integration Customer losses Loss of key staff
4 Share Key Info from Seminar
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-
httpsptfinancewordpresscom
Simple Financial Model amp Powerpoint presentationDownloadable From
Thank You
- Slide 1
- Slide 2
- Slide 3
- Slide 4
- Slide 5
- Slide 6
- Slide 7
- Slide 8
- Slide 9
- Slide 10
- Slide 11
- Slide 12
- Slide 13
- Slide 14
- Slide 15
- Slide 16
- Slide 17
- Slide 18
- Slide 19
- Slide 20
- Slide 21
- Slide 22
- Slide 23
- Slide 24
- Slide 25
- Slide 26
-