Financial Analysis Exercise

The firm Bellum, with a capital of 8000 stock of 100 euros, produces and sell hygiene and beauty products. it considers launching an anti-aging product that necessitates an investment of 1 900 000 euros starting the beginning of the first year:

1 100 000 of constructions amortized linearly over 10 years

800 000 construction material amortized linearly over 5 years

The forecasted EBITDA and Needs in working capital have been evaluated for the first 4 working years (in euros)

Year 1 2 3 4

EBITDA 720,000 1,020,000 1,020,000 1,020,000

Needs in Working capital :

100,000 120,000 120,000 120,000

The chosen financing is a mixture:

Capital increase of 400,000 euros . The dividend of 20$ distributed to the old stocks will be maintained and attributed to the new stocks starting year 2

An 800 000 euros loan , paid back by constant fractions over a period of4 years, the first installment intervening by the end of the first year at a rate of 9%

The current activities generate an operating cash flow of 300 000 euros that will remain constant throughout the plan lifespan

The old loans were fully reimbursed

The initial treasury is negligible

The-corporate tax t is 33,33%

a) Calculate the foretasted operating cash flows

b) Establish the financial plan for a 4 years period

c) Knowing that the firm enjoys a comfortable scope for debt, propose a solution to equilibrate the plan. Present the new accounting balances

d) the cash low of the first year will not be cashed at the same time: What problem may that causes?