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05+000Assignment 4
- Calculated by formula
Example Scenario Scenario Scenario
INVESTMENT COSTS (per OPERATIONAL UNIT)
(1)= (e/f) Start-up Working Capital Costs (per Month) 5,330,508 4,806,431 4,584,042 4,595,271
(a) Operational Unit's monthly HR cost 19,322,034 23,184,300 27,670,282 33,262,172
(b) Operational Unit's monthly General Operating cost 2,000,000 2,450,000 2,890,000 3,500,000
(a+b) Operational Unit's Total Start-up Working Capital 21,322,034 25,634,300 30,560,282 36,762,172
(d)= (a+b)/2 Average Monthly Start-up Working Capital 10,661,017 12,817,150 15,280,141 18,381,086
(c) Number of Months expected for a new operational unit to reach its steady-state 18 18 18 18
(e)= (c*d) Total Start-up Working Capital Costs (during the start-up period) 191,898,305 230,708,700 275,042,540 330,859,544
(f) Number of Months of investment/Loan Period 36 48 60 72
(2)= (m/f) Cost of Funds (per Month) 1,080,074 1,029,756 1,035,989 1,092,619
(g) Operational Unit's total capital asset costs (Note: not depreciation cost) 7,500,000 7,500,000 7,500,000 7,500,000
(h) Operational Unit's Start-up Working Capital costs (calculated as 'e' above) 191,898,305 230,708,700 275,042,540 330,859,544
(k)= (g+h) Total Investment Funds required 199,398,305 238,208,700 282,542,540 338,359,544
(i) Risk Free Rate (%) 7.50% 7.75% 8% 8.25%
(j) Risk Premium (%) 12% 13% 14% 15%
(l)= (i+j) Required Rate of Return/Rate on Investment (ROI) 20% 20.75% 22% 23.25%
(m)= (k*l) Total Cost of Funds 38,882,669 49,428,305 62,159,359 78,668,594
=(f) Number of Months of investment/Loan Period 36 48 60 72
(3)= (n+o)/(1-p) - (n+o) Tax Costs (per Month) 2,493,004 2,269,629 2,185,568 2,211,958
(n)= (e/f) Operational Unit's Monthly Start-up Working Capital Costs (calculated as '1' above) 5,330,508 4,806,431 4,584,042 4,595,271
(o)= (m/f) Operational Unit's Monthly Cost of Funds (calculated as '2' above) 1,080,074 1,029,756 1,035,989 1,092,619
(p) Tax rate (%) 28% 28% 28% 28%
(A)= (1+2+3) Investment Costs for Operational Unit 8,903,587 8,105,816 7,805,600 7,899,848
INVESTMENT COST (for HEAD OFFICE)
(4)= (E/f) Start-up Working Capital (per Month) 8,211,016 10,477,500 14,976,387 22,624,919
(A) Head Office's monthly HR cost 32,344,064 55,280,001 99,122,581 180,249,355
(B) Head Office's monthly General Operating cost 500,000 600,000 720,000 750,000
(A+B) Head Office's Total Start-up Working Capital 32,844,064 55,880,001 99,842,581 180,999,355
(D)= (A+B)/2 Average Monthly Start-up Working Capital 16,422,032 27,940,000 49,921,290 90,499,677
=(c) Number of Months expected for a new operational unit to reach its steady-state 18 18 18 18
(E)= (c*D) Total Start-up Working Capital required to reach steady-state 295,596,573 502,920,008 898,583,226 1,628,994,194
(5)= (M/f) Cost of Funds (per Month) 4,309,481 4,335,540 5,128,138 6,874,877
(G) Head Office's total capital asset costs (Note: not depreciation cost) 500,000,000 500,000,000 500,000,000 500,000,000
(H) Head Office's Start-up Working Capital costs (calculated as 'E' above) 295,596,573 502,920,008 898,583,226 1,628,994,194
(K)= (G+H) Total Investment Funds required 795,596,573 1,002,920,008 1,398,583,226 2,128,994,194
=(l) Required Rate of Return/Rate on Investment (ROI) 20% 20.75% 22% 23.25%
(M)= (K*l) Total Cost of Funds 155,141,332 208,105,902 307,688,310 494,991,150
=(f) Number of Months of investment/Loan Period 36 48 60 72
(6)= (N+O)/(1-p) - (N+O) Tax Cost (per Month) 4,869,082 5,760,627 7,818,427 11,472,143
(N)= (E/f) Head Office's Monthly Start-up Working Capital (calculated as '4' above) 8,211,016 10,477,500 14,976,387 22,624,919
(O)= (M/f) Head Office's Monthly Cost of Funds (calculated as '5' above) 4,309,481 4,335,540 5,128,138 6,874,877
(B)= (4+5+6) Investment Costs for Head Office 17,389,580 20,573,666 27,922,952 40,971,939
OPERATIONAL UNIT'S TOTAL INVESTMENT COST
(7) Total number of Operational Units at steady state (use the figure from Assignment 3) 10 10 11 11
(C)= (B)/(7) Allocated Head Office Cost (to each Operational Unit) 1,738,734 1,993,074 2,639,060 3,735,677
(A + C) Total Investment Costs that each Operational Unit needs to cover 10,642,321 10,098,890 10,444,659 11,635,525
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Financial Modeling for the Social Sector
Assignment 3
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Financial Modeling for the Social Sector
Assignment 3
Reflections
What have you noticed from this exercise? If you have tried to scenario test suggested in the 'How to use the Template' document, please share your findings here
From this module we understand the concept of 'whole-cost structure' and How to identify the three main components of 'total running costs' and how to estimate them in our project. This
excel template really help us to identify the items of running cost for operational unit and which cost for the head office.
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Financial Modeling for the Social Sector
05+000Assignment 2
- Calculated by formula
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