Input -->

Drivers

Selected case 2

Inflation
Expected long-term inflation Italy 1%
Expected long-term inflation Vietnam 3%

Price of production
Price of production in Italy 15,500
Price of production in Vietnam 11,000

Estimated initial investment (in EUR)

Best case 320,000,000
Base case 350,000,000
Worst case 380,000,000

Useful life (years) 10

WC Italy
DIO 25
DPO 30
Net Trading Cycle (days) -5

Company beta 0.9

Financing facilities
Senior Facility (million EUR) 200,000,000
Interest rate Senior Facility 5%
Repay Senior Facility in 10 years

Covenant 1
Production should not be less than 15,000 per year.
Otherwise penalty of $1,000,000 per year.

Tax rate 30%

Residual value of the project 100,000,000

Comparable companies Leverage (D/E) Beta

Company A 80% 0.6
Company B 90% 0.65
Company C 85% 0.57

Market risk premium in Vietnam 6%

Market risk premium in Italy 5%

Risk-free rate in Vietnam 3%

Risk-free rate in Italy 2%
Workings -->
Savings forecast
Best volume 22,000
Base volume 20,000
Worst volume 18,000

Volume (in units) 1 2 3 4 5

Best case 18,700 19,140 19,580 20,240 19,800
Base case 16,000 17,000 17,400 18,000 17,600
Worst case 13,500 14,400 14,760 15,120 14,940
Selected case 16,000 17,000 17,400 18,000 17,600

Productivity (as a %) 1 2 3 4 5
Best case 85% 87% 89% 92% 90%
Base case 80% 85% 87% 90% 88%
Worst case 75% 80% 82% 84% 83%

Expected long-term inflation Italy 1%

Expected long-term inflation Vietnam 3%

Price of production (EUR) 1 2 3 4 5

Price of production in Italy 15,500 15,655 15,812 15,970 16,129
Price of production in Vietnam 11,000 11,330 11,670 12,020 12,381
Savings per unit 4,500 4,325 4,142 3,950 3,749

Total savings (EUR) 1 2 3 4 5

Best case 84,150,000 82,780,500 81,093,507 79,941,290 74,225,552
Base case 72,000,000 73,525,000 72,064,710 71,094,033 65,978,268
Worst case 60,750,000 62,280,000 61,130,754 59,718,988 56,006,553
Selected case 72,000,000 73,525,000 72,064,710 71,094,033 65,978,268
 6 7 8 9 10
19,580 19,140 18,700 18,480 18,260
17,400 17,000 16,600 16,400 16,200
14,760 14,400 14,040 13,860 13,680
17,400 17,000 16,600 16,400 16,200

6 7 8 9 10
89% 87% 85% 84% 83%
87% 85% 83% 82% 81%
82% 80% 78% 77% 76%

6 7 8 9 10
16,291 16,454 16,618 16,784 16,952
12,752 13,135 13,529 13,934 14,353
3,539 3,319 3,089 2,850 2,600

6 7 8 9 10
69,286,590 63,525,413 57,773,378 52,664,453 47,469,001
61,572,353 56,422,780 51,285,458 46,736,852 42,113,791
52,230,341 47,793,414 43,376,376 39,498,339 35,562,757
61,572,353 56,422,780 51,285,458 46,736,852 42,113,791
Fixed asset roll-forward

Estimated initial investment (in EUR)

Best case 320,000,000
Base case 350,000,000
Worst case 380,000,000

Useful life (years) 10

Investment plan 0 1 2 3 4
Year 1 80% 10% 10% 3% 3%

in EUR 1 2 3 4 5
Beginning PP&E 280,000,000 287,000,000 290,500,000 266,000,000 240,450,000
Capex 35,000,000 35,000,000 10,500,000 10,500,000 10,500,000
D&A (28,000,000) (31,500,000) (35,000,000) (36,050,000) (37,100,000)
Ending PP&E 287,000,000 290,500,000 266,000,000 240,450,000 213,850,000

D&A schedule (in EUR) 1 2 3 4 5

Capex Year 1 (28,000,000) (28,000,000) (28,000,000) (28,000,000) (28,000,000)
Capex Year 2 (3,500,000) (3,500,000) (3,500,000) (3,500,000)
Capex Year 3 (3,500,000) (3,500,000) (3,500,000)
Capex Year 4 (1,050,000) (1,050,000)
Capex Year 5 (1,050,000)
Capex Year 6
Capex Year 7
Capex Year 8
Capex Year 9
Capex Year 10
D&A (28,000,000) (31,500,000) (35,000,000) (36,050,000) (37,100,000)
 5 6 7 8 9 10
3% 3% 3% 3% 3% 3%

6 7 8 9 10
213,850,000 186,200,000 157,500,000 127,750,000 96,950,000
10,500,000 10,500,000 10,500,000 10,500,000 10,500,000
(38,150,000) (39,200,000) (40,250,000) (41,300,000) (42,350,000)
186,200,000 157,500,000 127,750,000 96,950,000 65,100,000

6 7 8 9 10
(28,000,000) (28,000,000) (28,000,000) (28,000,000) (28,000,000)
(3,500,000) (3,500,000) (3,500,000) (3,500,000) (3,500,000)
(3,500,000) (3,500,000) (3,500,000) (3,500,000) (3,500,000)
(1,050,000) (1,050,000) (1,050,000) (1,050,000) (1,050,000)
(1,050,000) (1,050,000) (1,050,000) (1,050,000) (1,050,000)
(1,050,000) (1,050,000) (1,050,000) (1,050,000) (1,050,000)
(1,050,000) (1,050,000) (1,050,000) (1,050,000)
(1,050,000) (1,050,000) (1,050,000)
(1,050,000) (1,050,000)
(1,050,000)
(38,150,000) (39,200,000) (40,250,000) (41,300,000) (42,350,000)
Working capital

WC Italy
DIO 25
DPO 30
Net Trading Cycle (days) -5

WC Vietnam
DIO 50
DPO 30
Net Trading Cycle (days) 20

in EUR 1 2 3 4
Extra production value 176,000,000 192,610,000 203,056,260 216,359,946
Delta net trading cycle (days) 25 25 25 25
Working capital (12,222,222) (13,375,694) (14,101,129) (15,024,996)
Delta Working Capital (12,222,222) (1,153,472) (725,435) (923,867)

DIO Vietnam
Best case 45
Base case 50
Worst case 55

DPO Vietnam
Best case 25
Base case 30
Worst case 35
 5 6 7 8 9 10
217,898,506 221,885,058 223,287,779 224,574,968 228,525,323 232,510,581
25 25 25 25 25 25
(15,131,841) (15,408,685) (15,506,096) (15,595,484) (15,869,814) (16,146,568)
(106,844) (276,844) (97,411) (89,388) (274,330) (276,754)
Financing

Investment in Year 0 280,000,000

Financing facilities
Debt Facility (million EUR) 200,000,000
Interest rate Debt Facility 5%
Repay Debt Facility in 10 years

in EUR 0 1 2 3
Beginning Debt 200,000,000 200,000,000 200,000,000 190,000,000
Repayment - - (10,000,000) (20,000,000)
Repayment % 0% 0% 5% 10%
Ending Debt 200,000,000 200,000,000 190,000,000 170,000,000

Interest expense - (10,000,000) (10,000,000) (9,500,000)

Volume - 16,000 17,000 17,400

Volume lower than 16,000? Yes No No No
Covenant Penalty - - - -

Net Cash Flow (280,000,000) 4,577,778 7,764,028 23,069,862

Equity financing 80,000,000 80,000,000 80,000,000 80,000,000
 4 5 6 7 8 9 10
170,000,000 150,000,000 130,000,000 110,000,000 90,000,000 70,000,000 50,000,000
(20,000,000) (20,000,000) (20,000,000) (20,000,000) (20,000,000) (20,000,000) (20,000,000)
10% 10% 10% 10% 10% 10% 10%
150,000,000 130,000,000 110,000,000 90,000,000 70,000,000 50,000,000 30,000,000

(8,500,000) (7,500,000) (6,500,000) (5,500,000) (4,500,000) (3,500,000) (2,500,000)

18,000 17,600 17,400 17,000 16,600 16,400 16,200

No No No No No No No
- - - - - - -

23,206,956 21,457,943 19,218,803 16,808,535 14,235,433 11,881,466 8,837,037

80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000
P&L

in EUR 1 2 3 4 5
Savings (EBITDA) 72,000,000 73,525,000 72,064,710 71,094,033 65,978,268
D&A (28,000,000) (31,500,000) (35,000,000) (36,050,000) (37,100,000)
EBIT 44,000,000 42,025,000 37,064,710 35,044,033 28,878,268
Interest expenses (10,000,000) (10,000,000) (9,500,000) (8,500,000) (7,500,000)
Covenants - - - - -
EBT 34,000,000 32,025,000 27,564,710 26,544,033 21,378,268
Taxes (10,200,000) (9,607,500) (8,269,413) (7,963,210) (6,413,480)
Net Income 23,800,000 22,417,500 19,295,297 18,580,823 14,964,788
 6 7 8 9 10
61,572,353 56,422,780 51,285,458 46,736,852 42,113,791
(38,150,000) (39,200,000) (40,250,000) (41,300,000) (42,350,000)
23,422,353 17,222,780 11,035,458 5,436,852 (236,209)
(6,500,000) (5,500,000) (4,500,000) (3,500,000) (2,500,000)
- - - - -
16,922,353 11,722,780 6,535,458 1,936,852 (2,736,209)
(5,076,706) (3,516,834) (1,960,637) (581,056) -
11,845,647 8,205,946 4,574,821 1,355,796 (2,736,209)
Cash Flow

in EUR 0 1 2 3 4
Savings per unit (EBITDA) - 72,000,000 73,525,000 72,064,710 71,094,033
Taxes - (10,200,000) (9,607,500) (8,269,413) (7,963,210)
Delta Working Capital - (12,222,222) (1,153,472) (725,435) (923,867)
Capex (280,000,000) (35,000,000) (35,000,000) (10,500,000) (10,500,000)
Operating Cash Flow (280,000,000) 14,577,778 27,764,028 52,569,862 51,706,956
Debt repayment - - (10,000,000) (20,000,000) (20,000,000)
Interest expenses - (10,000,000) (10,000,000) (9,500,000) (8,500,000)
Covenant penalty - - - - -
Net Cash Flow (280,000,000) 4,577,778 7,764,028 23,069,862 23,206,956
 5 6 7 8 9 10 Residual Value
65,978,268 61,572,353 56,422,780 51,285,458 46,736,852 42,113,791
(6,413,480) (5,076,706) (3,516,834) (1,960,637) (581,056) -
(106,844) (276,844) (97,411) (89,388) (274,330) (276,754)
(10,500,000) (10,500,000) (10,500,000) (10,500,000) (10,500,000) (10,500,000)
48,957,943 45,718,803 42,308,535 38,735,433 35,381,466 31,337,037
(20,000,000) (20,000,000) (20,000,000) (20,000,000) (20,000,000) (20,000,000)
(7,500,000) (6,500,000) (5,500,000) (4,500,000) (3,500,000) (2,500,000)
- - - - - -
21,457,943 19,218,803 16,808,535 14,235,433 11,881,466 8,837,037 100,000,000
WACC

Cost of debt 5%
Risk-free in Vietnam 3%
Tax rate 30%
Market risk premium in Vietnam 6%

Comparable companies Leverage (D/E) Beta

Company A 80% 0.60
Company B 90% 0.65
Company C 85% 0.57

in EUR 0 1 2 3 4
Debt financing 200,000,000 200,000,000 190,000,000 170,000,000 150,000,000
Equity financing 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000
Total financing 280,000,000 280,000,000 270,000,000 250,000,000 230,000,000

Debt financing % 71.4% 71.4% 70.4% 68.0% 65.2%

Equity financing % 28.6% 28.6% 29.6% 32.0% 34.8%
Total financing % 100.0% 100.0% 100.0% 100.0% 100.0%

Comparable companies:
Average leverage 85%
Average beta 0.61

Project beta:
Debt / Equity 2.50 2.50 2.38 2.13 1.88
Beta unlevered 0.38 0.38 0.38 0.38 0.38
Project beta: 1.05 1.05 1.01 0.95 0.88

Cost of equity 9.3% 9.3% 9.1% 8.7% 8.3%

WACC 5.2% 5.2% 5.2% 5.2% 5.2%

 5 6 7 8 9 10
130,000,000 110,000,000 90,000,000 70,000,000 50,000,000 30,000,000
80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000
210,000,000 190,000,000 170,000,000 150,000,000 130,000,000 110,000,000

61.9% 57.9% 52.9% 46.7% 38.5% 27.3%

38.1% 42.1% 47.1% 53.3% 61.5% 72.7%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1.63 1.38 1.13 0.88 0.63 0.38

0.38 0.38 0.38 0.38 0.38 0.38
0.81 0.75 0.68 0.61 0.55 0.48

7.9% 7.5% 7.1% 6.7% 6.3% 5.9%

5.2% 5.2% 5.2% 5.2% 5.2% 5.2%

Output -->
Discounted Cash Flows

Selected case 2

Residual Value 70,000,000

in EUR 0 1 2 3
Net Cash Flow (80,000,000) 4,577,778 7,764,028 23,069,862
Net Cash Flow + Residual Value (80,000,000) 4,577,778 7,764,028 23,069,862
Cost of equity 9.3% 9.1% 8.7%
Discounted Cash Flow (80,000,000) 4,189,194 6,525,703 17,973,574
Present Value Residual Value
Discounted Cash Flow with Residual Value (80,000,000) 4,189,194 6,525,703 17,973,574

Sum of Discounted Cash Flows (NPV) * 63,012,060

IRR 17.7%

Sensitivity analysis
17.7%
70,000,000
80,000,000
85,000,000
95,000,000
115,000,000
 4 5 6 7 8 9 10 Residual Value
23,206,956 21,457,943 19,218,803 16,808,535 14,235,433 11,881,466 8,837,037 70,000,000
23,206,956 21,457,943 19,218,803 16,808,535 14,235,433 11,881,466 78,837,037
8.3% 7.9% 7.5% 7.1% 6.7% 6.3% 5.9%
16,883,654 14,686,643 12,467,871 10,413,360 8,486,110 6,867,290 4,990,206
39,528,456
16,883,654 14,686,643 12,467,871 10,413,360 8,486,110 6,867,290 44,518,662