ASSUMPTIONS
MAIN CONDITIONS

Financial forecast embraces the period of 5 years:

  • 1 years for investment program,
  • 4 years for accumulation and return of invested resources.

All calculations in charts are in Euro.
The step is set at the period 1 year.
The flat-model was applied for cash-flow calculations, i.e. changes in income and expenses due to any factors such as, inflation, change in the prices, growth of manufacturing etc. were not considered.
Year 5 is taken as a basic year where the project reaches the planned working load.

Calculation of indexes of the effectiveness (IRR, MIRR, NPV, NPVR) includes the revenue of the forecast period (5 years) and of the remaining period of project`s economic life. Discount rate is 3%.
Investment in equipment for resale of electricity and the adjacent network is€35,074 thousand without taking into account the reinvestment and financing of working capital.

Payback period – 4 years
Operating margin – 74,9%
Net profit – 39 275
Net profit margin – 74,9%

PROJECT EFFECTIVENESS
MAIN INDICATORS

IRR. Internal Rate of Return is the discount rate at which the total revenue of the project would be equal to the total expenditures on the project implementation. IRR takes all positive and negative cash flows of the project into consideration and is calculated for a certain period of time (the forecast period). The rate was calculated taking the revenue of the forecast period (5 years) and of the remaining economic life of the project into consideration.

Profitability Index. The present index represents the relation of the discounted revenue to the discounted expenditures of the project and is closely connected with NPV described above.

If the profitability index is more than 1, then project can be considered economically sound and financially attractive. The difference between PI and NPV is the following: PI allows to evaluate the degree to which discounted revenues surpass discounted expenditures of the project. The rate was calculated taking the revenue of the forecast period (5 years) and of the remaining economic life of the project into consideration.

B/C Ratio. The ratio demonstrates the relation of the discounted gains (revenue) to all discounted expenditures of the project for the forecast period. If the ratio is more than 1 then the project can be considered economically expedient and attractive. The rate was calculated taking the revenue of the forecast period (5 years) and not taking the remaining economic life of the project into consideration.

Payback Period is the period necessary for total undiscounted revenue of the project to become equal to the total undiscounted expenditures on project implementation.

Return On Investment (ROI) – represents the relation of the annual net operational revenue from invested resources to the cost of these resources (e.i. total amount of investment). This ratio characterizes the effectiveness of investment.