Example of cash flow

It is considered that in the study of the feasibility of a new project

the first two years and U$600 from the third year, when the product s
increase by 20%.
The technical study defined an optimal category for the project that req

Land $ 12,000.00
Physical works $ 60,000.00
Machinery $ 48,000.00

One of the machines, which is valued at $10,000.00, needs to be replaced.

The growth of production to meet the increase in sales

The manufacturing costs for a volume of up to 55,000 units per year

Labor $ 20.00
Materials $ 35.00
Indirect costs $ 5.00

At this level of production, it is possible to import the ma directly.

The fixed manufacturing costs are estimated at $2,000.00, excluding depreciation.

The increase in capacity will cause these to rise by $200.0.

Administrative and sales expenses are estimated at $800.00 annually.

The variable sales expenses correspond to 2% commissions on

Intangible assets are amortized linearly over five years. The expense
viability, which amounts to $800.00

La inversión en capital de trabajo se estima en el equivalente a seis me

The corporate tax rate is 15% and the required profitability

 It is estimated to produce and sell 50,000 units annually of a product.
have consolidated in the market. The sales projections

it will want the following investments for a volume of 50,000 units

every eight years for another similar one. The used machine could sell

it would require an investment of $12,000.00 in additional physical works and

annual are:

materials at a unit cost of $32.00

appreciation.
00

the first five years and at $820.00 when it increases the

and sales. The depreciation of physical works is 20 years and all

os de puesta en marcha ascienden a $2,000.00 dentro de los qu

total disbursable cost.

a al capital invertido es de 12%.

up to U$500 each during the
s muestran que a partir del sexto año éstas se podrían

units.

to be in $2,500.00

$8,000.00 in machinery.

operating level.

the machinery in 10 years.

the cost of the study is included

For the construction of the cash flow, the procedure follows the stated structure.

a. Ingresos afectos a impuestos: están constituidos por los ingresos esperado

multiplying the price per unit by the number of units that are p
estimated sale of the machine that will be replaced at the end of the eighth year

b. Expenses subject to taxes: They correspond to the resulting variable costs.

fixed annual manufacturing, sales commission, and fixed administrative expenses

c. Non-disbursable expenses: They consist of depreciation, the amortization

Depreciation is obtained by applying the annual depreciation rate to each asset.

Activos 1 2 3
Initial physical work 3,000.00 3,000.00 ###
Physical work expansion
Initial machinery (a) 3,800.00 3,800.00 ###
Initial machinery (b) 1,000.00 1,000.00 ###
Replacement machinery
Machinery expansion
Total Depreciation 7,800.00 7,800.00 7,800.00

The amortization of intangibles corresponds to 20% annually of the total assets.

The book value is the balance to be depreciated of the asset that is sold at the end of the
The book corresponds to $2 million.

d. Tax calculation: It is determined as 15% of the profits before taxes.

e. Adjustment for non-disbursable expenses: To cancel the effect of having included

The reason for including them first and removing them later is due to the im

f. Expenditures not subject to taxes: They are made up of those disbursements

cash movements, At time zero, the investment in land is recorded, or
the cost of the study as it is a committed cost independent of the decision
face the expansion of production capacity starting from the sixth year and
50% (half a year) of the annual disbursement costs is noted down first in

g, Waste value: It was calculated by dividing the flow of the tenth year, without waste value.

Data in thousands
Concept 0 1 2
Ingresos 0 25,000.00 25,000.00
Sale of assets
Variable costs - 3,000.00 3,000.00
Fixed manufacturing costs - 2,000.00 ###
Sales commissions - 500.00 - 500.00
Administrative and sales expenses - 800.00 ###
Depreciation - 7,800.00 ###
Intangible amortization - 400.00 - 400.00
Book value
Utilidad antes impuestos 10,500.00 10,500.00
Taxes - 2,100.00 - 2,100.00
Net utility 8,400.00 8,400.00
Depreciation 7,800.00 ###
Intangible amortization 400.00 ###
Book value
Initial investment - 121,200.00
Replacement investment
investment expansion
Capital investment work - 3,150.00
Waste value
Cash flow 124,350.00 16,600.00 16,600.00
yes, which considers the following items.

or for the sale of the products, which is calculated

they plan to produce and sell each year and for the income
no.

tes del costo de fabricación unitario por las unidades producidas, el costo
rationing and sales.

amortization of intangibles and the book value of the asset that is sold for replacement.
active:

4 5 6 7 8
3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
600.00 600.00 600.00
3,800.00 3,800.00 3,800.00 3,800.00 3,800.00
1,000.00 1,000.00 1,000.00 1,000.00 1,000.00

800.00 800.00 800.00

7,800.00 7,800.00 9,200.00 9,200.00 9,200.00

possible intangibles to be accounted for, including the cost of the study.

eighth year. Since this had a cost of $10 million and depreciates over 10 years, its v

of taxes.

of expenses that did not constitute cash outflows, depreciation and amortization are added.
Importance of incorporating the tax effect that these accounts cause in favor of

those not incorporated in the income statement at the time they occur
physical works and machinery ($120,000,000) plus relevant investment in assets
decision I made regarding whether or not to undertake the project); at the fifth moment (end of the 5th
and at the eighth moment, the investment to replace the sold asset. The investment in c
at zero moment and then, the increase in this investment, at moments two and c

that, minus the annual depreciation for the required rate of return.

10
3 4 5 6 7
30,000.00 30,000.00 30,000.00 36,000.00 36,000.00

- 3,000.00 - 3,000.00 - 3,000.00 - 3,420.00 - 3,420.00

- 2,000.00 2,000.00 - 2,000.00 - 2,200.00 - 2,200.00
- 600.00 - 600.00 - 600.00 - 720.00 - 720.00
- 800.00 - 800.00 - 800.00 - 820.00 - 820.00
- 7,800.00 - 7,800.00 7,800.00 - 9,200.00 9,200.00
- 400.00 - 400.00 - 400.00

15,400.00 15,400.00 15,400.00 19,640.00 19,640.00

- 3,080.00 - 3,080.00 - 3,080.00 - 3,928.00 3,928.00
12,320.00 12,320.00 12,320.00 15,712.00 15,712.00
7,800.00 7,800.00 7,800.00 9,200.00 9,200.00
400.00 400.00 400.00

- 20,000.00
- 50.00 - 380.00

20,470.00 20,520.00 140.00 24,912.00 24,912.00

 9 10
3,000.00 3,000.00
600.00 600.00
3,800.00 3,800.00

1,000.00 1,000.00
800.00 800.00
9,200.00 9,200.00

value

intangible assets and book value.

the project.

and that must be included for being

ntangibles. (de los $2 millones se excluye
for the year) the investment is recorded for
working capital is calculated as the
five

8 9 10
36,000.00 36,000.00 36,000.00
2,500.00
- 3,420.00 - 3,420.00 - 3,420.00
- 2,200.00 - 2,200.00 - 2,200.00
- 720.00 - 720.00 - 720.00
- 820.00 - 820.00 820.00
- 9,200.00 9,200.00 9,200.00

- 2,000.00
20,140.00 19,640.00 19,640.00
- 4,028.00 3,928.00 - 3,928.00
16,112.00 15,712.00 15,712.00
9,200.00 9,200.00 9,200.00

2,000.00

- 10,000.00

139,117.00
17,312.00 24,912.00 164,029.00
Si para el ejemplo del acápite anterior se supone que el inversio
equal annual installments over eight years, the first thing to have

Para diferenciar la parte de la cuota que corresponde a los inter

the debt at the beginning of each year; in the second, the amount that it covers

Balance debt $ Fee $ Interest $

80,000.00 13,921.18 6,400.00
72,478.82 13,921.18 5,798.31
64,355.94 13,921.18 5,148.48
55,583.24 13,921.18 4,446.66
46,108.72 13,921.18 3,688.70
35,876.23 13,921.18 2,870.10
24,825.15 13,921.18 1,986.01
12,889.98 13,921.18 1,031.20

When incorporating the loan amount, the annual interest, and the a
1
Concept 0 1
Income 0 25,000.00
Asset sale
Variable costs - 3,000.00
Fixed manufacturing costs - 2,000.00
Sales commissions - 500.00
Administration and sales expenses - 800.00
Loan Interest - 6,400.00
Depreciation - 7,800.00
Intangible amortization - 400.00
Book value
Profit before tax 4,100.00
Taxes - 820.00
Net utility 3,280.00
Depreciation 7,800.00
Intangible amortization 400.00
Book value
Initial investment - 121,200.00
Replacement investment
investment expansion
Inversión capital trabajo - 3,150.00
Loan 80,000.00
Amortización de la deuda - 7,521.18
Valor desecho
Cash flow - 44,350.00 3,958.82
Factor 1/(1+Tasa)^n 0.8333
Discounted Value
VAN $2,980.97
RequiredRate: 20%
TIR 21%

At time zero, the net investment is reduced to $124,350.00

 The borrower will obtain an initial loan of $80,000.00 at a real interest rate of 8%
it is necessary to calculate the amount of the debt and the composition of each of them

respective of the amortization, a payment table is prepared that expresses, in the pr

mortizará la deuda inicial, calculada cono la diferencia entre la cuota y el interés por p

Amortization $
7,521.18
8,122.88
8,772.71
9,474.52
10,232.48
11,051.08
11,935.17
12,889.98

Amortization of each period, the cash flow of the investor remains:

2 3 4 5 6
2 3 4 5 6
25,000.00 30,000.00 30,000.00 30,000.00 36,000.00

- 3,000.00 - 3,000.00 - 3,000.00 - 3,000.00 - 3,420.00

- 2,000.00 ### - 2,000.00 - 2,000.00 - 2,200.00
- 500.00 - 600.00 - 600.00 - 600.00 - 720.00
- 800.00 ### - 800.00 800.00 - 820.00
- 5,798.31 - 5,148.48 - 4,446.66 - 3,688.70 - 2,870.10
- 7,800.00 ### - 7,800.00 - 7,800.00 9,200.00
- 400.00 - 400.00 - 400.00 - 400.00

4,701.69 10,251.52 10,953.34 11,711.30 16,769.90

- 940.34 - 2,050.30 - 2,190.67 - 2,342.26 3,353.98
3,761.36 8,201.22 8,762.67 9,369.04 13,415.92
7,800.00 ### 7,800.00 7,800.00 9,200.00
400.00 ### 400.00 400.00

- 20,000.00
- 50.00 - 380.00

- 8,122.88 8,772.71 9,474.52 - 10,232.48 - 11,051.08

3,838.48 7,578.51 7,488.15 - 13,043.44 11,564.84

 0.6944 0.5787 0.4823 0.4019 0.3349

0 in the project flow, to only $44,350 in the investor flow, who when investing
%, which must be paid in
three interests and amortization.

first column, the balance of

to pay.

7 8 9 10
7 8 9 10
36,000.00 36,000.00 36,000.00 36,000.00
2,500.00
- 3,420.00 - 3,420.00 - 3,420.00 - 3,420.00
- 2,200.00 - 2,200.00 - 2,200.00 - 2,200.00
- 720.00 - 720.00 - 720.00 - 720.00
- 820.00 820.00 - 820.00 820.00
- 1,986.01 - 1,031.20
- 9,200.00 - 9,200.00 - 9,200.00 - 9,200.00

- 2,000.00
17,653.99 19,108.80 19,640.00 19,640.00
- 3,530.80 - 3,821.76 - 3,928.00 - 3,928.00
14,123.19 15,287.04 15,712.00 15,712.00
9,200.00 9,200.00 9,200.00 9,200.00

2,000.00

10,000.00

- 11,935.17 - 12,889.98
139,117.00
11,388.02 3,597.06 24,912.00 164,029.00
 0.2791 0.2326 0.1938 0.1615

This amount has the projected net debt returns in the last cash flow statement.
cash flow.