Phuket Beach Hotel (2)
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Analysis of Cash Flow - Planet Karaoke Pub figures in baht Yr. 0 Rental income less less less
less
add less
Yr. 1
Yr. 2
2,040,000 2,040,000
Depreciation Increase in repair and maintenance expenses Decrease in net room revenue
-192,500 -192500 -10,000 -10,000 -1,650,000 -1,683,000
Additional Operating Income
187,500
154,500
Taxes
-56,250
-46,350
NOPAT
131,250
108,150
192,500
192,500
Depreciation Capital Expenditure
-770,000
Operating Cash Flow
-770,000
323,750
300,650
Discounted Operating Cash Flow @ 10.75%
-770,000
292,325
245,117
Payback Period Discounted Payback Period Average Return on Investment NPV PI IRR Equivalent Annuity
2.46 yrs 3.01 yrs 39% 165,017 baht 1.21 21% 52,906 baht
Working Notes 1. Rental income = baht 170,000*12 for the years 1 and 2 and increase by 5% in the years 3 and 4 2. Straight line depreciation 3. Patronage factor taken as 0.5 i.e. 12.5% reduction in net room revenue 4. Taxes at 30% 5. Base capital cost = baht 770,000 6. WACC = 10.75%
Yr. 3
Yr. 4
2,142,000 2,142,000 -192500 -192500 -10,000 -10,000 -1,767,125 -1,855,500 172,375
84,000
-51,713
-25,200
120,662
58,800
192,500
192,500
313,162
251,300
230,536
167,039
Analysis of Cash Flow - Beach Karaoke Pub figures in baht Yr. 0 Sales less less less less less
Food and Beverage Cost Other Operating Expenses Depreciation Increase in repair and maintenance expenses Decrease in net room revenue Additional Operating Income
less
Taxes NOPAT
add less
Yr. 1
Yr. 2
4,672,000
4,905,600
-1,168,000 -1,027,840 -283,333 -10,000 -1,650,000
-1,226,400 -1,079,232 -283,333 -10,000 -1,683,000
532,827
623,635
-159,848
-187,090
372,979
436,544
Depreciation Capital Expenditure
-1,700,000
283,333 -283,333
283,333 -283,333
Operating Cash Flow
-1,700,000
372,979
436,544
Discounted Operating Cash Flow @ 10.75%
-1,700,000
336,775
355,911
Payback Period Discounted Payback Period Average Return on Investment NPV PI IRR Equivalent Annuity
3.84 yrs 4.95 yrs 30% 373,043 baht 1.22 17% 87,545 baht
Working Notes 1. Growth rate in sales = 5% 2. Food and beverage cost at 25% of sales 3. Other operating expenses at 22% of sales 4. Salaries not considered as sunk cost 5. Straight line depreciation 6. Patronage factor taken as 0.5 i.e. 12.5% reduction in net room revenue 7. Taxes at 30% 8. Base capital cost = baht 1,700,000 9. WACC = 10.75%
Yr. 3
Yr. 4
Yr. 5
Yr. 6
5,150,880 5,408,424 5,678,845 5,962,787 -1,287,720 -1,352,106 -1,419,711 -1,490,697 -1,133,194 -1,189,853 -1,249,346 -1,311,813 -283,333 -283,333 -283,333 -283,333 -10,000 -10,000 -10,000 -10,000 -1,767,125 -1,855,500 -1,892,500 -1,930,375 669,508
717,631
823,955
936,569
-200,852
-215,289
-247,186
-280,971
468,656
502,342
576,768
655,598
283,333 -283,333
283,333 -283,333
283,333 -283,333
283,333 -283,333
468,656
502,342
576,768
655,598
345,003
333,906
346,165
355,284
Weighted Average Cost of Capital (WACC)
WACC = We*Ke + Wd*Kd*(1-t) We = proportion of debt in total financing = 25% Wd = proportion of equity in total financing = 75% Ke = cost of equity = 12% Kd = cost of debt = 10% t = tax rate = 30% WACC = 0.75*0.12 + 0.25*0.10*(1-0.30) = 10.75%
Sensitivity Analysis - One Factor Equivalent Annuity (EA) in baht Sensitivity Analysis: Patronage Factor Patronage Factor 0 0.25 0.5 0.75 1
Lease option -EA 1,263,950 658,428 52,906 -552,616 -1,158,138
Build option - EA 1,332,436 709,990 87,545 -534,901 -1,157,347
Decision Build Build Build Reject both Reject both
Sensitivity Analysis: Upfront Investment % Increase in Lease option -EA Upfront Investment 0% 52,906 5% 43,450 10% 33,994 20% 15,082 30% -3,830
Build option - EA 87,545 57,680 27,816 -31,912 -91,641
Decision Build Build Lease Lease Reject both
Sensitivity Analysis: Cost of Capital Cost of Capital 8% 10.75% 12% 14% 16% 18% 20% 22%
Lease option -EA 66,676 52,906 46,536 36,207 25,712 15,057 4,247 -6,712
Build option - EA 122,557 87,545 71,332 45,022 18,274 -8,889 -36,449 -64,385
Decision Build Build Build Build Lease Lease Lease Reject both
Sensitivity Analysis - Two Factors Factors: Cost of Capital and Patronage Factor Equivalent Annuity (EA) in baht The Build Option Patronage Cost of Capital Factor 8% 10.75% 12% 14% 16% 18% 0 1,370,536 1,332,436 1,314,853 1,286,391 1,257,545 1,228,335 0.25 746,546 709,990 693,092 663,706 637,910 609,723 0.5 122,557 87,545 71,332 45,022 18,274 -8,889 0.75 -501,433 -534,901 -550,428 -575,663 -601,361 -627,501 1 -1,125,422 -1,157,347 -1,172,189 -1,196,348 -1,220,996 -1,246,114
The Lease Option Patronage Cost of Capital Factor 8% 10.75% 12% 14% 16% 18% 0 1,279,229 1,263,950 1,256,911 1,245,531 1,234,011 1,222,356 0.25 672,952 658,428 651,724 640,869 629,862 618,706 0.5 66,676 52,906 46,536 36,207 25,712 15,057 0.75 -539,601 -552,616 -558,651 -568,455 -578,437 -588,592 1 -1,145,877 -1,158,138 -1,163,838 -1,173,117 -1,182,587 -1,192,241
Difference in EA (Build - Lease) Patronage Factor 0 0.25 0.5 0.75 1
8% 91,307 73,594 55,881 38,168 20,455
10.75% 64,486 51,562 34,639 17,715 791
Cost of Capital 12% 14% 57,942 40,860 41,368 24,837 24,796 8,815 8,223 -7,208 -8,351 -23,231
16% 23,534 8,048 -7,438 -22,924 -38,409
18% 5,979 -8,983 -23,946 -38,909 -53,873
Decision Patronage Cost of Capital Factor 8% 10.75% 12% 14% 16% 18% 0 Build Build Build Build Build Build 0.25 Build Build Build Build Build Lease 0.5 Build Build Build Build Lease Lease 0.75 Rej. Both Rej. Both Rej. Both Rej. Both Rej. Both Rej. Both 1 Rej. both Rej. Both Rej. Both Rej. Both Rej. Both Rej. both
less
add less
Yr. 1
Yr. 2
2,040,000 2,040,000
Depreciation Increase in repair and maintenance expenses Decrease in net room revenue
-192,500 -192500 -10,000 -10,000 -1,650,000 -1,683,000
Additional Operating Income
187,500
154,500
Taxes
-56,250
-46,350
NOPAT
131,250
108,150
192,500
192,500
Depreciation Capital Expenditure
-770,000
Operating Cash Flow
-770,000
323,750
300,650
Discounted Operating Cash Flow @ 10.75%
-770,000
292,325
245,117
Payback Period Discounted Payback Period Average Return on Investment NPV PI IRR Equivalent Annuity
2.46 yrs 3.01 yrs 39% 165,017 baht 1.21 21% 52,906 baht
Working Notes 1. Rental income = baht 170,000*12 for the years 1 and 2 and increase by 5% in the years 3 and 4 2. Straight line depreciation 3. Patronage factor taken as 0.5 i.e. 12.5% reduction in net room revenue 4. Taxes at 30% 5. Base capital cost = baht 770,000 6. WACC = 10.75%
Yr. 3
Yr. 4
2,142,000 2,142,000 -192500 -192500 -10,000 -10,000 -1,767,125 -1,855,500 172,375
84,000
-51,713
-25,200
120,662
58,800
192,500
192,500
313,162
251,300
230,536
167,039
Analysis of Cash Flow - Beach Karaoke Pub figures in baht Yr. 0 Sales less less less less less
Food and Beverage Cost Other Operating Expenses Depreciation Increase in repair and maintenance expenses Decrease in net room revenue Additional Operating Income
less
Taxes NOPAT
add less
Yr. 1
Yr. 2
4,672,000
4,905,600
-1,168,000 -1,027,840 -283,333 -10,000 -1,650,000
-1,226,400 -1,079,232 -283,333 -10,000 -1,683,000
532,827
623,635
-159,848
-187,090
372,979
436,544
Depreciation Capital Expenditure
-1,700,000
283,333 -283,333
283,333 -283,333
Operating Cash Flow
-1,700,000
372,979
436,544
Discounted Operating Cash Flow @ 10.75%
-1,700,000
336,775
355,911
Payback Period Discounted Payback Period Average Return on Investment NPV PI IRR Equivalent Annuity
3.84 yrs 4.95 yrs 30% 373,043 baht 1.22 17% 87,545 baht
Working Notes 1. Growth rate in sales = 5% 2. Food and beverage cost at 25% of sales 3. Other operating expenses at 22% of sales 4. Salaries not considered as sunk cost 5. Straight line depreciation 6. Patronage factor taken as 0.5 i.e. 12.5% reduction in net room revenue 7. Taxes at 30% 8. Base capital cost = baht 1,700,000 9. WACC = 10.75%
Yr. 3
Yr. 4
Yr. 5
Yr. 6
5,150,880 5,408,424 5,678,845 5,962,787 -1,287,720 -1,352,106 -1,419,711 -1,490,697 -1,133,194 -1,189,853 -1,249,346 -1,311,813 -283,333 -283,333 -283,333 -283,333 -10,000 -10,000 -10,000 -10,000 -1,767,125 -1,855,500 -1,892,500 -1,930,375 669,508
717,631
823,955
936,569
-200,852
-215,289
-247,186
-280,971
468,656
502,342
576,768
655,598
283,333 -283,333
283,333 -283,333
283,333 -283,333
283,333 -283,333
468,656
502,342
576,768
655,598
345,003
333,906
346,165
355,284
Weighted Average Cost of Capital (WACC)
WACC = We*Ke + Wd*Kd*(1-t) We = proportion of debt in total financing = 25% Wd = proportion of equity in total financing = 75% Ke = cost of equity = 12% Kd = cost of debt = 10% t = tax rate = 30% WACC = 0.75*0.12 + 0.25*0.10*(1-0.30) = 10.75%
Sensitivity Analysis - One Factor Equivalent Annuity (EA) in baht Sensitivity Analysis: Patronage Factor Patronage Factor 0 0.25 0.5 0.75 1
Lease option -EA 1,263,950 658,428 52,906 -552,616 -1,158,138
Build option - EA 1,332,436 709,990 87,545 -534,901 -1,157,347
Decision Build Build Build Reject both Reject both
Sensitivity Analysis: Upfront Investment % Increase in Lease option -EA Upfront Investment 0% 52,906 5% 43,450 10% 33,994 20% 15,082 30% -3,830
Build option - EA 87,545 57,680 27,816 -31,912 -91,641
Decision Build Build Lease Lease Reject both
Sensitivity Analysis: Cost of Capital Cost of Capital 8% 10.75% 12% 14% 16% 18% 20% 22%
Lease option -EA 66,676 52,906 46,536 36,207 25,712 15,057 4,247 -6,712
Build option - EA 122,557 87,545 71,332 45,022 18,274 -8,889 -36,449 -64,385
Decision Build Build Build Build Lease Lease Lease Reject both
Sensitivity Analysis - Two Factors Factors: Cost of Capital and Patronage Factor Equivalent Annuity (EA) in baht The Build Option Patronage Cost of Capital Factor 8% 10.75% 12% 14% 16% 18% 0 1,370,536 1,332,436 1,314,853 1,286,391 1,257,545 1,228,335 0.25 746,546 709,990 693,092 663,706 637,910 609,723 0.5 122,557 87,545 71,332 45,022 18,274 -8,889 0.75 -501,433 -534,901 -550,428 -575,663 -601,361 -627,501 1 -1,125,422 -1,157,347 -1,172,189 -1,196,348 -1,220,996 -1,246,114
The Lease Option Patronage Cost of Capital Factor 8% 10.75% 12% 14% 16% 18% 0 1,279,229 1,263,950 1,256,911 1,245,531 1,234,011 1,222,356 0.25 672,952 658,428 651,724 640,869 629,862 618,706 0.5 66,676 52,906 46,536 36,207 25,712 15,057 0.75 -539,601 -552,616 -558,651 -568,455 -578,437 -588,592 1 -1,145,877 -1,158,138 -1,163,838 -1,173,117 -1,182,587 -1,192,241
Difference in EA (Build - Lease) Patronage Factor 0 0.25 0.5 0.75 1
8% 91,307 73,594 55,881 38,168 20,455
10.75% 64,486 51,562 34,639 17,715 791
Cost of Capital 12% 14% 57,942 40,860 41,368 24,837 24,796 8,815 8,223 -7,208 -8,351 -23,231
16% 23,534 8,048 -7,438 -22,924 -38,409
18% 5,979 -8,983 -23,946 -38,909 -53,873
Decision Patronage Cost of Capital Factor 8% 10.75% 12% 14% 16% 18% 0 Build Build Build Build Build Build 0.25 Build Build Build Build Build Lease 0.5 Build Build Build Build Lease Lease 0.75 Rej. Both Rej. Both Rej. Both Rej. Both Rej. Both Rej. Both 1 Rej. both Rej. Both Rej. Both Rej. Both Rej. Both Rej. both
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