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15 Financial Feasibility Study 592 651
15 Financial Feasibility Study 592 651
15 Financial Feasibility Study 592 651
FINANCIAL
FEASIBILTY STUDY
592
Technological Institute of the Philippines
DIRECT COST
While prices may change considerably with time due to changes in economic
conditions, cost index must be used for updating cost data. To estimate the cost of
equipment, Chemical Engineering Plant cost index (CEPCI) is used. Relative to the target
date of ordering equipment and delivery, the cost index for year 2006 and 2018 are 499.6
and 517 respectively. Table 15.1 shows the total cost for equipment.
593
Technological Institute of the Philippines
594
Technological Institute of the Philippines
A cost index is merely an index value for a given period point in time showing the
cost at that time relative to a certain base time. If the cost at some time in the past is known,
the equivalent cost at the present time can be determined by multiplying the original cost
by the ratio of the present index value to the index value applicable when the original cost
was obtained.
For the Production of Hydrofluoric Acid from Fluorspar with Sulfuric Acid, we
used the Marshall and Swift Equipment Cost Indexes projected to 2018. We used the
projections cost index
By plotting the data above, using GMDH Shell we could get the cost index for year 2018.
1,941,250.00(517.0)
Present Cost = = 2,008,859.59
(499.6)
595
Technological Institute of the Philippines
Other calculations of the present cost for the other equipment are the same with the
calculations above.
The various types of equipment can be divided into processing equipment, raw-
materials handling and storage equipment, and finished-products handling and storage
equipment. The following costs of purchased equipment are obtained directly from the
suppliers of Hydrofluor Philippines.
Equipment Supplier
Fluorspar Silo Xinxiang Jinxin Machinery Equipment Co., Ltd
Fluorspar Grinding Mill Shanghai Clirik Machinery Co., Ltd.
Classifier Denver Equipment Company
Flotation Cells Metso Corporation
Thickener Zhengzhou Heavy Duty Machine Mfg Co., Ltd.
Rotary Drum Filter Henan Zhongke Engineering & Technology Co., Ltd.
Rotary Dryer Henan Zhongke Engineering & Technology Co., Ltd.
Rotary kiln Xinxiang Jinxin Machinery Equipment Co., Ltd
Acid Scrubber Yixing Haina Environmental Engineering Co., Ltd
Water Scrubber Yixing Haina Environmental Engineering Co., Ltd
Vaporizer Xinxiang Jinxin Machinery Equipment Co., Ltd
Flash Tank Vulcan Manufacturing Co.
Condenser Xinxiang Jinxin Machinery Equipment Co., Ltd
AHF Storage Tank Hubei Dali Special Automobile Mfg Co.,Ltd
Water Storage tank Langfang City Dingtian Light Industry
Oleum Tank Yantai Xinhai Mining Machinery Co., Ltd
Conveyor Ikushima Co., Ltd.
Pump RNW Pacific Pipes Corporation
Compressor RNW Pacific Pipes Corporation
596
Technological Institute of the Philippines
2. Equipment Installation
The installation of equipment involves costs directly related to the assembly of
purchased equipment such as labor, foundation, support, platform and construction
expenses. Installation costs for equipment is 30 percent of purchased equipment costs.(M.
S. Peters & K. D. Timmerhaus, 1991)
5. Electrical Installation
Labor for installation and materials for power and lighting primarily comprised the
cost for electrical installations. The electrical installation involves power wiring, lighting,
transformation and service, and instrument and control wiring. The cost for electrical
installation is 10 percent of purchased equipment cost.(M. S. Peters & K. D. Timmerhaus,
1991)
6. Service Facilities
Services facilities consist of the utilities for supplying water, power, steam, and
fuel. Fire protection, waste disposal and miscellaneous service items are included as well.
The cost of service facilities is 50 percent of purchased equipment cost. (M. S. Peters & K.
D. Timmerhaus, 1991)
597
Technological Institute of the Philippines
8. Land Cost
The total cost of land depends on the value of land where plant is located and other
fees which include title fees, legal fees, survey costs, zoning fees, site preparation costs
and etc. The value of land in Calamba Premiere International Park located in Calamba,
Laguna is 2,000 Php/square meter. Hydrofluor Philippines is a 4-hectare production plant.
Table 15.4 shows the total land cost for a 40,000 square meters total land area.
INDIRECT COST
1.Engineering and Supervision
The expenses for construction design and engineering, purchasing, travel,
reproductions, communication, drafting, accounting, and construction and cost engineering
comprise the investment for engineering and supervision. This cost is usually considered
as indirect cost in fixed-capital investment, which is 32 percent of the total cost of
purchased equipment.(M. S. Peters & K. D. Timmerhaus, 1991)
2. Contractors Fee
The contractors fee is the payment involved in the construction contract and other
related charges. This cost is usually considered as 19 percent of the total cost of purchased
equipment.(M. S. Peters & K. D. Timmerhaus, 1991)
598
Technological Institute of the Philippines
3. Contingencies
A contingency amount is incorporated in the estimation of the project cost which
takes account the occurrences in the unexpected events and charges which inevitably
increase the cost of the project. Inevitable events such as storms, flood, transportation
accidents, strikes, price changes, errors of the estimation and unforeseen expenses may
occur; hence each should have its own appropriation. This cost is 37 percent of the total
cost of purchased equipment.(M. S. Peters & K. D. Timmerhaus, 1991)
Working Capital
The working capital for an industrial plant consists of the total amount of money
invested in (1)raw materials and suppliers carried in stock, (2) finished products in stock
and semi-finished products in the process of being manufactured, (3) accounts receivable,
(4) cash kept on hand for monthly payment of operating expenses, such as salaries, wages,
and raw-material purchases, (5) accounts payable, and (6) taxes payable. (Peters &
Timmerhaus, 1991). Using Lang Factor, working capital is 15 percent of the total fixed-
capital investment.
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Technological Institute of the Philippines
Fixed-Capital Investment
Item %PE Cost (Php)
Direct Cost
1. Purchased Equipment 100 134,578,280.33
2. Equipment Installation 30 40,373,484.10
3. Piping and Insulation 10 13,457,828.03
4. Instrumentation and Control 13 17,495,176.44
5. Electrical Installation 10 13,457,828.03
6. Service Facilities 50 67,289,140.16
7. Buildings and Structures 30 40,373,484.10
8. Land Cost - 84,000,000.00
Indirect Cost
1.Engineering and Supervision 32 43,065,049.70
2. Contractors Fee 19 25,569,873.26
3. Contingencies 37 49,793,963.72
Total Fixed-Capital Investment (FCI) - 529,454,107.88
79,418,116.18
Working Capital 59
600
Technological Institute of the Philippines
I. Manufacturing Cost
It is all expenses directly connected with the manufacturing operation.
These expenses are divided into three classifications;
1. Raw Materials
The costs of raw materials involved in the process usually constitute the
main expenses in the production operation. Other fees is considered 5 percent of
the total amount. The table shows the expenses for raw material (Perry & Green,
2008)
Table 15.6 Raw Material Cost per Annum
Material Consumption Price (Php) Cost (Php)
(kg/hr)
Fluorspar 529.8 18.78/kg 71,637,436.80
Sulfuric Acid 592.5 12.85/kg 54,818,100.00
Oleum 216.01 20.50/kg 31,883,076.00
Water 1568.21 53.42/m3 603,171.20
Other Fees 7,947,089.20
Total 166,888,873.20
601
Technological Institute of the Philippines
2. Operating Labor
Operating labor can be classified into skilled and unskilled labor which amounts
to 15 percent of the total product cost. In operating labor costs, variety of worker
needed, prevailing work rates, worker productivity, and plant geographical location
must be taken into account. Organizational chart used is from Management Study.
Salary breakdown is shown in Table 15.8. (M. S. Peters & K. D. Timmerhaus, 1991)
602
Technological Institute of the Philippines
President 1 85,000.00 1,020,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 850 1700 10200 265,814.59 22151.216 60,129.98 724,231.008
Legal Counsel 1 38,000.00 456,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 380 760 4560 89505.68 7458.806667 28,762.39 342,179.920
Executive Auditor 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Executive Secretary 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Operations Department
Manager 1 38,000.00 456,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 380 760 4560 89505.68 7458.806667 28,762.39 342,179.920
Secretary 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Process Area Officer 1 28,000.00 336,000.00 1,208.70 581.3 14504.40 350 350 4200 280 560 3360 54180.68 4515.056667 21,993.64 259,754.920
Engineering Officer 1 25,000.00 300,000.00 1,208.70 581.3 14504.40 312.5 312.5 3750 250 500 3000 44686.4 3723.866667 19,882.33 234,059.200
QA/QC Supervisor 1 23,000.00 276,000.00 1,208.70 581.3 14504.40 287.5 287.5 3450 230 460 2760 38821.4 3235.116667 18,436.08 216,464.200
Pollution Control Officer 1 25,000.00 300,000.00 1,208.70 581.3 14504.40 312.5 312.5 3750 250 500 3000 44686.4 3723.866667 19,882.33 234,059.200
Packaging Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Warehouse Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Logistics Head 1 22,000.00 264,000.00 1,208.70 581.3 14504.40 275 275 3300 220 440 2640 35888.9 2990.741667 17,712.96 207,666.700
Process Operator 10 15,000.00 1,800,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 20,406.26 1700.5216 12,230.68 1,761,039.341
Engineering Staff 3 18,000.00 648,000.00 1,208.70 581.3 14504.40 225 225 2700 180 360 2160 150,163.39 12513.616 4,320.08 478,472.208
QA/QC Staff 3 18,000.00 648,000.00 1,208.70 581.3 14504.40 225 225 2700 180 360 2160 150,163.39 12513.616 4,320.08 478,472.208
Pollution Control Staff 2 18,000.00 432,000.00 1,208.70 581.3 14504.40 225 225 2700 180 360 2160 83790.68 6982.556667 9,851.14 328,844.920
Packaging Staff 4 13,000.00 624,000.00 967.70 472.3 11612.40 162.5 162.5 1950 130 260 1560 143,840.83 11986.736 118.46 465,036.768
Warehouse Staff 4 13,000.00 624,000.00 967.70 472.3 11612.40 162.5 162.5 1950 130 260 1560 143,840.83 11986.736 118.46 465,036.768
Logistics Staff 4 14,000.00 672,000.00 1,041.30 508.7 12495.60 175 175 2100 140 280 1680 13,457.95 1121.496 11,914.80 642,266.448
Driver 2 9,000.00 216,000.00 673.00 327 8076.00 112.5 112.5 1350 90 180 1080 26373.5 2197.791667 6,182.71 179,120.500
Manager 1 38,000.00 456,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 380 760 4560 89505.68 7458.806667 28,762.39 342,179.920
Secretary 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Recruitment Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
General Service Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Health Officer 1 24,000.00 288,000.00 1,208.70 581.3 14504.40 300 300 3600 240 480 2880 41753.9 3479.491667 19,159.21 225,261.700
Doctor 1 22,000.00 264,000.00 1,208.70 581.3 14504.40 275 275 3300 220 440 2640 35888.9 2990.741667 17,712.96 207,666.700
Dentist 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Nurse 2 14,000.00 336,000.00 1,041.30 508.7 12495.60 175 175 2100 140 280 1680 55917.32 4659.776667 8,376.52 263,807.080
Security Officer 1 13,000.00 156,000.00 967.70 472.3 11612.40 162.5 162.5 1950 130 260 1560 12675.52 1056.293333 11,048.91 128,202.080
Maintenance Officer 1 12,000.00 144,000.00 894.00 436 10728.00 150 150 1800 120 240 1440 10506.4 875.5333333 10,298.47 119,525.600
Training Staff 2 13,000.00 312,000.00 967.70 472.3 11612.40 162.5 162.5 1950 130 260 1560 49219.4 4101.616667 8,003.58 247,658.200
Recruitment Staff 2 12,000.00 288,000.00 894.00 436 10728.00 150 150 1800 120 240 1440 43508 3625.666667 7,548.33 230,524.000
General Service Staff 2 12,000.00 288,000.00 894.00 436 10728.00 150 150 1800 120 240 1440 43508 3625.666667 7,548.33 230,524.000
Security Guard 4 10,000.00 480,000.00 746.70 363.3 8960.40 125 125 1500 100 200 1200 100501.88 8375.156667 936.54 367,837.720
Maintenance Staff 4 9,000.00 432,000.00 673.00 327 8076.00 112.5 112.5 1350 90 180 1080 86448.2 7204.016667 1,176.48 335,045.800
603
Technological Institute of the Philippines
Finance Department
Manager 1 38,000.00 456,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 380 760 4560 89505.68 7458.806667 28,762.39 342,179.920
Secretary 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Chief Accountant 1 25,000.00 300,000.00 1,208.70 581.3 14504.40 312.5 312.5 3750 250 500 3000 44686.4 3723.866667 19,882.33 234,059.200
Payroll Master 1 18,000.00 216,000.00 1,208.70 581.3 14504.40 225 225 2700 180 360 2160 24158.9 2013.241667 14,820.46 172,476.700
Book Keeper 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Accounting Staff 2 15,000.00 360,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 62433.68 5202.806667 8,728.39 279,011.920
Accounting Clerk 2 15,000.00 360,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 62433.68 5202.806667 8,728.39 279,011.920
Manager 1 38,000.00 456,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 380 760 4560 89505.68 7458.806667 28,762.39 342,179.920
Secretary 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Process Developer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Product Developer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Researcher 2 15,000.00 360,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 62433.68 5202.806667 8,728.39 279,011.920
Manager 1 38,000.00 456,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 380 760 4560 89505.68 7458.806667 28,762.39 342,179.920
Secretary 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Marketing Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Advertising and Promotion Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Sales Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Marketing Staff 2 15,000.00 360,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 62433.68 5202.806667 8,728.39 279,011.920
Advertising and Promotion Staff 2 15,000.00 360,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 62433.68 5202.806667 8,728.39 279,011.920
Sales Staff 4 15,000.00 720,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 17,115.65 1426.304 12,504.90 684,329.952
Purchasing Department
Manager 1 30,000.00 360,000.00 1,208.70 581.3 14504.40 375 375 4500 300 600 3600 61218.68 5101.556667 23,342.14 276,176.920
Purchasing Staff 2 13,000.00 312,000.00 967.70 472.3 11612.40 162.5 162.5 1950 130 260 1560 49063.28 4088.606667 8,016.59 247,814.320
604
Technological Institute of the Philippines
4. Utilities
The costs for utilities vary mainly with the plant location, amount of
consumption, source. These comprise of the electricity and fuel used in
operation.(M. S. Peters & K. D. Timmerhaus, 1991)
B. Fixed Charges
All the expenses which do not vary with time and changes in production
rate, such as taxes, insurance, rent, and depreciation are included in the fixed
charges.
605
Technological Institute of the Philippines
1. Depreciation
Materials, buildings, and equipment included in manufacturing plant need
a certain amount of initial investment which is disregarded as a manufacturing
expense. Depreciation is the decrease in value that is presumed to arise in order to
write off this cost. Initial cost and salvage value are assumed in order to determine
the rate of depreciation. The annual cost due to depreciation can be obtained
through the difference between the initial cost and salvage value divided by the
total years of useful life. The annual rate of depreciation for machinery and
equipment is 10 percent of the tied-capital investment. Annual depreciation rate of
about 3 percent of the initial cost is for the equipment.(M. S. Peters & K. D.
Timmerhaus, 1991)
Table 15.9 Total Depreciation Cost
606
Technological Institute of the Philippines
2. Local Taxes
Plant location and regional laws are considered for the local property taxes.
Annual property taxes for plants in economic zones is 1% of land cost
(80,000,000.00).(M. S. Peters & K. D. Timmerhaus, 1991)
3. Insurance
Rate of insurance basically depends on the process type in manufacturing
operation and on the extent of available protection facilities. This rate is 1 percent
of the fixed-capital investment.(M. S. Peters & K. D. Timmerhaus, 1991)
I. General Expenses
It is the other expenses involved in the companys operation.
A. Administrative Cost
The expenses associated with the administrative activities cannot be
included in the manufacturing costs. Salaries for administrators, secretaries,
accountants, staffs and workers are element of administrative costs, together with
the office supplies and administrative buildings. These costs are 3.5 percent of the
total product cost.(M. S. Peters & K. D. Timmerhaus, 1991)
B. Distribution and Marketing Costs
It is necessary to consider the expenses involve in selling the products to
ensure a profitable success of manufacturing operation. Salaries, supplies,
commission, travel, shipment, advertising, and technical services are included in
these expenses. The marketing cost is 2 percent of the total product cost .(M. S.
Peters & K. D. Timmerhaus, 1991)
607
Technological Institute of the Philippines
608
Technological Institute of the Philippines
A[(1 + i)n 1]
P1 =
(1 + i)n i
A[(1 + 0.06)8 1]
P1 =
(1 + 0.06)8 (0.06)
P1 = 6.2098A
Deferred Annuity:
P1 = P2 (1 + i)m
A = 121982378.8
i = interest = 6%
Loan Interest per Annum: 6% (Bank of the Philippine Island)
Source: Retrieved from (http://www.bsp.gov.ph/statistics/keystat/intrates.htm)
n = Ordinary Annuity Periods = 8
m = Deferred Periods = 4
609
Technological Institute of the Philippines
Annual Sales
Current Price (Price on year 2018 from Market Feasibility Study)
Hydrogen Fluoride : Php 250.00 / kg which is equivalent to Php 902.06 per gallon.
Using Pricing and Breakeven Analysis Excel, Optimum Price was calculated and used for
financial study. Annual sales is shown in Table 15.12, assuming 100% utilization on the
first year.
Rate of price increase per year: 10% ( From market Feasibilty Study. Historical data shows
that there is a 10% increase in price per year)
Utilization: 80% on the first year; 90% on second year; and 100% on the following years.
Cash Flow analysis is calculated every end of the month. That includes 11 months of the
year and the last month years income and expenses.
610
Technological Institute of the Philippines
Table 15.13. Cash Flow Sensitivity Analysis for December 31, 2017
611
Technological Institute of the Philippines
Table 15.14. Cash Flow Sensitivity Analysis for December 31, 2018
612
Technological Institute of the Philippines
Table 15.15. Cash Flow Sensitivity Analysis for December 31, 2019
613
Technological Institute of the Philippines
Table 15.16. Cash Flow Sensitivity Analysis for December 31, 2020
614
Technological Institute of the Philippines
Table 15.17. Cash Flow Sensitivity Analysis for December 31, 2021
615
Technological Institute of the Philippines
Table 15.18. Cash Flow Sensitivity Analysis for December 31, 2022
616
Technological Institute of the Philippines
Table 15.19. Cash Flow Sensitivity Analysis for December 31, 2023
617
Technological Institute of the Philippines
Table 15.20. Cash Flow Sensitivity Analysis for December 31, 2024
618
Technological Institute of the Philippines
Table 15.21. Cash Flow Sensitivity Analysis for December 31, 2025
619
Technological Institute of the Philippines
Table 15.22. Cash Flow Sensitivity Analysis for December 31, 2026
620
Technological Institute of the Philippines
INCOME STATEMENT
Income Tax Rate: 30% (starting 5th year) of gross profit
Source: Retrieved from
(http://www.peza.gove.ph/index.php/eligible-activities-incentives/fiscal-incentives)
HydroFluor Philippines
Income Statement
2017 2018 Variance
Revenue
Net Sales - 255,380,040.00 (255,380,040.00)
Cost of Goods Sold 7,095,951.32 39,020,776.86 (31,924,825.53)
Gross Profit (7,095,951.32) 216,359,263.14 (223,455,214.47)
Operating Expenses
Advertising Expenses 23,577,694.57 24,756,579.30 (1,178,884.73)
Process Aids and
Packaging 4,184,161.08 13,717,800.30 (9,533,639.22)
Research and
Development 29,472,118.21 32,419,330.03 (2,947,211.82)
Loan - - -
Depreciation Expence 21,269,485.49 42,538,970.97 (21,269,485.49)
Other 882,002.92 (11,231,685.91) 12,113,688.82
Total Operating
Expenses 79,385,462.26 102,200,994.70 (22,815,532.44)
Income From
Operations (86,481,413.58) 114,158,268.45 (200,639,682.03)
Income Tax
Expense - - -
621
Technological Institute of the Philippines
HydroFluor Philippines
Income Statement
2018 2019 Variance
Revenue
Net Sales 255,380,040.00 571,412,839.50 (316,032,799.50)
Cost of Goods Sold 39,020,776.86 29,983,372.04 9,037,404.82
Gross Profit 216,359,263.14 541,429,467.46 (325,070,204.32)
Operating Expenses
Advertising Expenses 24,756,579.30 25,935,464.02 (1,178,884.73)
622
Technological Institute of the Philippines
HydroFluor Philippines
Income Statement
2019 2020 Variance
Revenue
Net Sales 571,412,839.50 680,836,092.75 (109,423,253.25)
Cost of Goods Sold 29,983,372.04 35,239,853.09 (5,256,481.05)
Gross Profit 541,429,467.46 645,596,239.66 (104,166,772.20)
Operating Expenses
Advertising Expenses 25,935,464.02 27,114,348.75 (1,178,884.73)
623
Technological Institute of the Philippines
HydroFluor Philippines
Income Statement
2020 2021 Variance
Revenue
Net Sales 680,836,092.75 789,691,834.80 (108,855,742.05)
Cost of Goods Sold 35,239,853.09 79,421,121.42 (44,181,268.34)
Gross Profit 645,596,239.66 710,270,713.38 (64,674,473.71)
Operating Expenses
Advertising Expenses 27,114,348.75 28,293,233.48 (1,178,884.73)
624
Technological Institute of the Philippines
HydroFluor Philippines
Income Statement
2021 2022 Variance
Revenue
Net Sales 789,691,834.80 918,231,348.13 (128,539,513.33)
Cost of Goods Sold 79,421,121.42 251,067,728.04 (171,646,606.61)
Gross Profit 710,270,713.38 667,163,620.09 43,107,093.29
Operating Expenses
Advertising Expenses 28,293,233.48 29,472,118.21 (1,178,884.73)
625
Technological Institute of the Philippines
HydroFluor Philippines
Income Statement
2022 2023 Variance
Revenue
Net Sales 918,231,348.13 1,036,019,893.81 (117,788,545.69)
Cost of Goods Sold 251,067,728.04 323,989,035.57 (72,921,307.53)
Gross Profit 667,163,620.09 712,030,858.24 (44,867,238.15)
Operating Expenses
Advertising Expenses 29,472,118.21 30,651,002.94 (1,178,884.73)
626
Technological Institute of the Philippines
HydroFluor Philippines
Income Statement
2023 2024 Variance
Revenue
Net Sales 1,036,019,893.81 1,139,621,883.19 (103,601,989.38)
Cost of Goods Sold 323,989,035.57 309,398,054.28 14,590,981.29
Gross Profit 712,030,858.24 830,223,828.91 (118,192,970.67)
Operating Expenses
Advertising Expenses 30,651,002.94 31,829,887.67 (1,178,884.73)
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Technological Institute of the Philippines
HydroFluor Philippines
Income Statement
2024 2025 Variance
Revenue
Net Sales 1,139,621,883.19 1,253,584,071.51 (113,962,188.32)
Cost of Goods Sold 309,398,054.28 325,866,101.24 (16,468,046.96)
Gross Profit 830,223,828.91 927,717,970.28 (97,494,141.36)
Operating Expenses
Advertising Expenses 31,829,887.67 33,008,772.40 (1,178,884.73)
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Technological Institute of the Philippines
HydroFluor Philippines
Income Statement
2025 2026 Variance
Revenue
Net Sales 1,253,584,071.51 1,411,774,442.44 (158,190,370.93)
Cost of Goods Sold 325,866,101.24 329,371,364.67 (3,505,263.43)
Gross Profit 927,717,970.28 1,082,403,077.78 (154,685,107.50)
Operating Expenses
Advertising Expenses 33,008,772.40 37,295,625.95 (4,286,853.56)
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Technological Institute of the Philippines
BALANCE SHEET
HydroFluor Philippines
Balance Sheet: December 31, 2017
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Technological Institute of the Philippines
HydroFluor Philippines
Balance Sheet: December 31, 2018
631
Technological Institute of the Philippines
HydroFluor Philippines
Balance Sheet: December 31, 2019
632
Technological Institute of the Philippines
HydroFluor Philippines
Balance Sheet:December 31, 2020
633
Technological Institute of the Philippines
HydroFluor Philippines
Balance Sheet: December 31, 2021
634
Technological Institute of the Philippines
HydroFluor Philippines
Balance Sheet: December 31, 2022
635
Technological Institute of the Philippines
HydroFluor Philippines
Balance Sheet: December 31, 2023
636
Technological Institute of the Philippines
HydroFluor Philippines
Balance Sheet: December 31, 2024
637
Technological Institute of the Philippines
HydroFluor Philippines
Balance Sheet: December 31, 2025
638
Technological Institute of the Philippines
HydroFluor Philippines
Balance Sheet:December 31, 2026
639
Technological Institute of the Philippines
PAYBACK PERIOD
The payback period is the length of time until the sum of an investments cash flows
equals its cost.
Total Capital Investment = 608,872,224.06
Year Cost
2017 107,567,878.16
2018 215,426,228.10
2019 635,975,120.06
2020 1,027,457,479.07
2021 1,475,125,011.81
2022 1,713,600,047.59
2023 1,927,775,056.02
2024 2,237,732,848.36
2025 2,626,223,856.94
2026 3,154,781,606.74
The payback period for the business was computed to be on a span of 3 years.
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Technological Institute of the Philippines
PROFITABILITY TEST
40.00
20.00
% ROI
0.00
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
-20.00
-40.00
YEAR
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Technological Institute of the Philippines
dn = discount factor
i = interest rate of return
N = year of project life to which cash flow applies
3. Capitalized Cost
The capitalized-cost profitability concept is useful for comparing
alternatives which exists as possible investment choices within a single overall
project. Capitalized cost related to investment represents the amount of money that
must be available initially to purchase the equipment and simultaneously provide
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Technological Institute of the Philippines
K= capitalized Cost
CV= Original Cost of Equipment = Purchased Equipment
CR= Replacement Cost= CV
N= estimated useful life of equipment = 12
i= interest rate = 15%
, , .
= , , . +
( + . )
= , , .
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Technological Institute of the Philippines
It calculates the break-even point based on fixed costs, variable costs per unit of
sales and revenue per unit of sales (Hilton et. al, 2008). Break-even point is the time when
the total revenue of a company equals of that of the total cost.
Figure 15.2 Graph of Break Even Analysis of Hydrogen Fluoride at Current Price
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Technological Institute of the Philippines
Number of Sales
0 570 1,140 1,710 2,279
Business
0 154,215,000 308,430,000 462,645,000 616,860,000
Revenue
Unit Sales Price
270,619 270,619 270,619 270,619 270,619
Variable Costs
0 103,119,498 206,238,995 309,358,493 412,477,990
Variable Cost %
67% 67% 67% 67% 67%
Variable Costs
180,956 180,956 180,956 180,956 180,956
per Unit
Fixed Costs
100,037,920 100,037,920 100,037,920 100,037,920 100,037,920
Total Costs
100,037,920 203,157,417 306,276,915 409,396,412 512,515,910
Operating
-100,037,920 -48,942,417 2,153,085 53,248,588 104,344,090
Surplus
Surplus %
N/A -31.7% 0.7% 11.5% 16.9%
Breakeven Point
301,931,620 301,931,620 301,931,620 301,931,620 301,931,620
Revenue
Breakeven Point
1,116 1,116 1,116 1,116 1,116
Number of Sales
Note: Per unit of Hydrogen Fluoride has a volume of 300 gallons. Number of units
shown in Table 15.45. is rounded up to the nearest whole number.
Figure 15.2 shows the Break-even point at current price. The current price of
Hydrogen Fluoride per kilogram is Php 250 which is equivalent to Php 902.06 per gallon.
The break-even point is the intersection of the total sales and the companys total revenue.
Table 15.45. shows the summary of the break even analysis at current price. Per unit of
Hydrogen Fluoride has a volume of 300 gallons. The number of units shown in Table
15.45. is rounded up to the nearest whole number. The break even point at current price is
1,116 units or 334,800 gallons per annum.
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Technological Institute of the Philippines
Figure 15.3 Graph of Break Even Analysis of Hydrogen Fluoride at Increased Price
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Technological Institute of the Philippines
Figure 15.3 and Table 15.46 show the breakeven analysis for the increased price of
Carbon Black with Php 255,123,983 breakeven point revenue. The number of sales needed
by the company to reach the breakeven point is 857. Increased price breakeven analysis
shows another option for the company to know the minimum amount of sales needed to
breakeven using an increased price for the product.
Using the increased price, there will be a 23.21% decrease in the number of sales
compared to the current price of Hydrogen Fluoride. However, though increasing the
product price may shorten the time for achieving breakeven, it may affect the marketability
of the product especially in the local market.
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Technological Institute of the Philippines
Figure 15.4 Graph of Break Even Analysis of Hydrogen Fluoride at Decreased Price
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Technological Institute of the Philippines
Figure 15.4 and Table 15.47 show the breakeven analysis for the decreased price
of Hydrogen Fluoride with Php 389,208,165 breakeven point revenue. The number of sales
needed by the company to reach the breakeven point is 1,598. Decreased price breakeven
analysis shows another option for the company to know the minimum amount of sales
needed to breakeven using a decreased price for the product.
Using the decreased price, there will be an 30.16% increase in the number of sales
needed to be sold to achieve breakeven compared to the current price of Hydrogen
Fluoride. Decreased price of the product may increase the marketability of Hydrogen
Fluoride however it may prolong the company in achieving its breakeven point.
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Technological Institute of the Philippines
Figure 15.5 Graph of Break Even Analysis of Hydrogen Fluoride at Optimum Price
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Technological Institute of the Philippines
Figure 15.5 and Table 15.48 show the breakeven analysis for the optimum price of
Hydrogen Fluoride with Php 262,664,761 breakeven point revenue. The number of sales
needed by the company to reach the breakeven point is 899. Optimum price breakeven
analysis shows the best option for the company to know the minimum amount of sales
needed to breakeven using optimum parameters. Parameters such as price of the product,
operating surplus and number of sales as well as the fixed cost and the variable cost
determine the optimum point of breakeven revenue and sales for the company thus
optimizing its profit and ensuring good marketability for HydroFluor Philippines.
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