Technological Institute of the Philippines

FINANCIAL
FEASIBILTY STUDY

592
 Technological Institute of the Philippines

ESTIMATION OF CAPITAL INVESTMENT

Capital investment is the total amount needed to supply the necessary plant,
manufacturing facilities, and the working capital for operation of the facilities. Lang
Factor method is used to estimate the capital investment needed. Lang factors are rough
estimates based on the cost of purchased equipment for solid-fluid processing plant.
Working capital can be estimated as 20 percent of the fixed capital investment. Table 15.5
shows the total capital investment needed for the HydroFluor Philippines Corporation plant
capacity of 1,233,720 kg per year. The plant operates 24 hours a day for 300 days in a year.

Fixed capital investment (FCI)

Fixed capital investment represents the total cost of the plant ready for start-up. It
is the cost paid to the contractors. It includes the cost of design, and other engineering and
construction supervision; all items of equipment and its installation; all piping,
instrumentation and control system; building and structures; and, auxiliary facilities, such
as utilities, land, and civil engineering work.

Estimation of Fixed-Capital Investment items for a chemical process

DIRECT COST

1.Purchased Equipment (PE)

While prices may change considerably with time due to changes in economic
conditions, cost index must be used for updating cost data. To estimate the cost of
equipment, Chemical Engineering Plant cost index (CEPCI) is used. Relative to the target
date of ordering equipment and delivery, the cost index for year 2006 and 2018 are 499.6
and 517 respectively. Table 15.1 shows the total cost for equipment.

593
 Technological Institute of the Philippines

Table 15.1 Total Cost of Purchased Equipment, Pumps and Conveyors

TOTAL COST OF PRURCHASED EQUIPMENT, PUMPS AND

CONVEYORS
EQUIPMENT QTY. COST (PHP) COST ACTUAL COST
INDEX (PHP)
2006 2018
1. Fluorspar Silo 1 1,941,250.00 499.6 517 2,008,859.59
2. Fluorspar Grinding 1 2,588,551.10 499.6 517 2,678,704.80
Mill
3. Classifier 1 2,861,000.00 499.6 517 2,960,642.51
4. Flotation Cell Bank 1 6,870,653.75 499.6 517 7,109,943.93
Vessel
5. Thickener 1 2,482,500.00 499.6 517 2,568,960.17
6. Rotary Drum Filter 1 2,383,200.00 499.6 517 2,466,201.76
7. Rotary Dryer 1 2,234,250.00 499.6 517 2,312,064.15
8. Rotary kiln 1 13,336,427.24 499.6 517 13,800,906.49
9.Acid Scrubber 1 5,852,873.66 499.6 517 6,056,716.74
10. Water Scrubber 1 6,679,865.00 499.6 517 6,912,510.42
11. Vaporizer 1 4,503,246.00 499.6 517 4,660,084.43
12. Flash Tank 1 6,123,872.00 499.6 517 6,337,153.37
13. Cooler 1 1,726,114.44 499.6 517 1,786,231.32
14. AHF Storage Tank 1 5,649,254.64 499.6 517 5,846,006.10
15. Water Storage tank 1 2,770,376.97 499.6 517 2,866,863.28
16. Oleum Tank 1 10,300,967.09 499.6 517 10,659,727.75
17. Sulfuric Acid 1 10,601,934.18 499.6 517 10,971,176.88
Storage Tank
18. Conveyor 5 13,366,188.57 499.6 517 13,831,704.35
19. Pump 2 3,861,132.00 499.6 517 3,995,606.97
20. Compressor 4 10,910,401.32 499.6 517 11,290,387.27
Other Fees 13,457,828.03
Total Purchase Cost of 134,578,280.33
Equipment

594
 Technological Institute of the Philippines

Use of cost indexes

A cost index is merely an index value for a given period point in time showing the
cost at that time relative to a certain base time. If the cost at some time in the past is known,
the equivalent cost at the present time can be determined by multiplying the original cost
by the ratio of the present index value to the index value applicable when the original cost
was obtained.

For the Production of Hydrofluoric Acid from Fluorspar with Sulfuric Acid, we
used the Marshall and Swift Equipment Cost Indexes projected to 2018. We used the
projections cost index

Using the formula,

Cost of Equipment a (Cost Index b)
Present Cost =
(Cost Index a)

Table 15.2 Marshall and Swift Installed Equipment Indexes

(Reference: Chemical Engineering Plant Cost Index)

Year All Industry

2005 468.2
2006 499.6
2007 525.4
2008 575.4
2009 521.9
2010 550.8
2011 585.7
2012 584.6

By plotting the data above, using GMDH Shell we could get the cost index for year 2018.

Cost index at 2006 = 499.6

Cost index at 2018 = 517.0

Indexed Price for Fluorspar Silo:

1,941,250.00(517.0)
Present Cost = = 2,008,859.59
(499.6)

595
 Technological Institute of the Philippines

Other calculations of the present cost for the other equipment are the same with the
calculations above.

The various types of equipment can be divided into processing equipment, raw-
materials handling and storage equipment, and finished-products handling and storage
equipment. The following costs of purchased equipment are obtained directly from the
suppliers of Hydrofluor Philippines.

Table 15.3 Supplier of the Equipment

Equipment Supplier
Fluorspar Silo Xinxiang Jinxin Machinery Equipment Co., Ltd
Fluorspar Grinding Mill Shanghai Clirik Machinery Co., Ltd.
Classifier Denver Equipment Company
Flotation Cells Metso Corporation
Thickener Zhengzhou Heavy Duty Machine Mfg Co., Ltd.
Rotary Drum Filter Henan Zhongke Engineering & Technology Co., Ltd.
Rotary Dryer Henan Zhongke Engineering & Technology Co., Ltd.
Rotary kiln Xinxiang Jinxin Machinery Equipment Co., Ltd
Acid Scrubber Yixing Haina Environmental Engineering Co., Ltd
Water Scrubber Yixing Haina Environmental Engineering Co., Ltd
Vaporizer Xinxiang Jinxin Machinery Equipment Co., Ltd
Flash Tank Vulcan Manufacturing Co.
Condenser Xinxiang Jinxin Machinery Equipment Co., Ltd
AHF Storage Tank Hubei Dali Special Automobile Mfg Co.,Ltd
Water Storage tank Langfang City Dingtian Light Industry
Oleum Tank Yantai Xinhai Mining Machinery Co., Ltd
Conveyor Ikushima Co., Ltd.
Pump RNW Pacific Pipes Corporation
Compressor RNW Pacific Pipes Corporation

596
 Technological Institute of the Philippines

2. Equipment Installation
The installation of equipment involves costs directly related to the assembly of
purchased equipment such as labor, foundation, support, platform and construction
expenses. Installation costs for equipment is 30 percent of purchased equipment costs.(M.
S. Peters & K. D. Timmerhaus, 1991)

3. Piping and Insulation

Insulation factors can become essential when very high or very low temperatures
are to be considered. The total expenses for the labor and material needed for insulating
equipment is 10 percent of the purchased-equipment cost. This is comparable to 2 percent
of the fixed-capital investment.(M. S. Peters & K. D. Timmerhaus, 1991)

4. Instrumentation and Control

The main portion of the capital investment needed for instrumentation comprises
mostly of the instrument costs and expenses of labor for installation. The total
instrumentation cost represents 13 percent of the purchased equipment, which is 3 percent
of the total capital investment.(M. S. Peters & K. D. Timmerhaus, 1991)

5. Electrical Installation
Labor for installation and materials for power and lighting primarily comprised the
cost for electrical installations. The electrical installation involves power wiring, lighting,
transformation and service, and instrument and control wiring. The cost for electrical
installation is 10 percent of purchased equipment cost.(M. S. Peters & K. D. Timmerhaus,
1991)

6. Service Facilities
Services facilities consist of the utilities for supplying water, power, steam, and
fuel. Fire protection, waste disposal and miscellaneous service items are included as well.
The cost of service facilities is 50 percent of purchased equipment cost. (M. S. Peters & K.
D. Timmerhaus, 1991)

597
 Technological Institute of the Philippines

7. Buildings and Structures

The cost for buildings and structures includes materials, labor, and supplies needed
in the creation of all buildings in the plant. The buildings and structures expense is 30
percent of the purchased equipment cost. (M. S. Peters & K. D. Timmerhaus, 1991)

8. Land Cost
The total cost of land depends on the value of land where plant is located and other
fees which include title fees, legal fees, survey costs, zoning fees, site preparation costs
and etc. The value of land in Calamba Premiere International Park located in Calamba,
Laguna is 2,000 Php/square meter. Hydrofluor Philippines is a 4-hectare production plant.
Table 15.4 shows the total land cost for a 40,000 square meters total land area.

Table 15.4 Total Land Cost

Land Cost/ sq. meter 2,000.00
Total Land Area (square meter) 40000
Total Land Cost 80,000,000.00
Other Fees 4,000,000.00
Total 84,000,000.00

INDIRECT COST
1.Engineering and Supervision
The expenses for construction design and engineering, purchasing, travel,
reproductions, communication, drafting, accounting, and construction and cost engineering
comprise the investment for engineering and supervision. This cost is usually considered
as indirect cost in fixed-capital investment, which is 32 percent of the total cost of
purchased equipment.(M. S. Peters & K. D. Timmerhaus, 1991)

2. Contractors Fee
The contractors fee is the payment involved in the construction contract and other
related charges. This cost is usually considered as 19 percent of the total cost of purchased
equipment.(M. S. Peters & K. D. Timmerhaus, 1991)

598
 Technological Institute of the Philippines

3. Contingencies
A contingency amount is incorporated in the estimation of the project cost which
takes account the occurrences in the unexpected events and charges which inevitably
increase the cost of the project. Inevitable events such as storms, flood, transportation
accidents, strikes, price changes, errors of the estimation and unforeseen expenses may
occur; hence each should have its own appropriation. This cost is 37 percent of the total
cost of purchased equipment.(M. S. Peters & K. D. Timmerhaus, 1991)

Working Capital
The working capital for an industrial plant consists of the total amount of money
invested in (1)raw materials and suppliers carried in stock, (2) finished products in stock
and semi-finished products in the process of being manufactured, (3) accounts receivable,
(4) cash kept on hand for monthly payment of operating expenses, such as salaries, wages,
and raw-material purchases, (5) accounts payable, and (6) taxes payable. (Peters &
Timmerhaus, 1991). Using Lang Factor, working capital is 15 percent of the total fixed-
capital investment.

599
 Technological Institute of the Philippines

Table 15.5 Estimation of Fixed-Capital Investment

Fixed-Capital Investment
Item %PE Cost (Php)
Direct Cost
1. Purchased Equipment 100 134,578,280.33
2. Equipment Installation 30 40,373,484.10
3. Piping and Insulation 10 13,457,828.03
4. Instrumentation and Control 13 17,495,176.44
5. Electrical Installation 10 13,457,828.03
6. Service Facilities 50 67,289,140.16
7. Buildings and Structures 30 40,373,484.10
8. Land Cost - 84,000,000.00
Indirect Cost
1.Engineering and Supervision 32 43,065,049.70
2. Contractors Fee 19 25,569,873.26
3. Contingencies 37 49,793,963.72
Total Fixed-Capital Investment (FCI) - 529,454,107.88
79,418,116.18
Working Capital 59

Total Capital Investment

608,872,224.06

600
 Technological Institute of the Philippines

ESTIMATION OF TOTAL PRODUCT COST

Product costs are costs required to produce the product. Total product cost can be
estimated by summing the manufacturing cost and general expenses, as shown in Table
15.11.

I. Manufacturing Cost
It is all expenses directly connected with the manufacturing operation.
These expenses are divided into three classifications;

A. Direct Production Costs

Direct production expenses comprise all the costs related with the
manufacturing operation. These include raw materials expenditure, power,
operating supplies, plant maintenance and repairs, supervision and clerical labor,
and royalties.

1. Raw Materials
The costs of raw materials involved in the process usually constitute the
main expenses in the production operation. Other fees is considered 5 percent of
the total amount. The table shows the expenses for raw material (Perry & Green,
2008)
Table 15.6 Raw Material Cost per Annum
Material Consumption Price (Php) Cost (Php)
(kg/hr)
Fluorspar 529.8 18.78/kg 71,637,436.80
Sulfuric Acid 592.5 12.85/kg 54,818,100.00
Oleum 216.01 20.50/kg 31,883,076.00
Water 1568.21 53.42/m3 603,171.20
Other Fees 7,947,089.20
Total 166,888,873.20

601
 Technological Institute of the Philippines

2. Operating Labor
Operating labor can be classified into skilled and unskilled labor which amounts
to 15 percent of the total product cost. In operating labor costs, variety of worker
needed, prevailing work rates, worker productivity, and plant geographical location
must be taken into account. Organizational chart used is from Management Study.
Salary breakdown is shown in Table 15.8. (M. S. Peters & K. D. Timmerhaus, 1991)

Table 15.7 Operating Labor Cost per Annum

Operating Labor Cost 21,576,000.00 Php/year

602
 Technological Institute of the Philippines

Table 15.8 Summary of Salary Breakdown of HydroFluor Philippines

HYDROFLUOR PHILIPPINES SALARY 2018

Monthly SSS Contribution Total Monthly Philhealth Contribution Total Monthly Pag-ibig Contribution Annual Monthy
Position No. of Person Monthly Salary Total Annual Salary Net Pay Annual Net Pay
ER Share EE Share Total ER Share EE Share Total ER Share EE Share Total Withholding Tax Withholding Tax

President 1 85,000.00 1,020,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 850 1700 10200 265,814.59 22151.216 60,129.98 724,231.008
Legal Counsel 1 38,000.00 456,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 380 760 4560 89505.68 7458.806667 28,762.39 342,179.920
Executive Auditor 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Executive Secretary 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480

Operations Department

Manager 1 38,000.00 456,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 380 760 4560 89505.68 7458.806667 28,762.39 342,179.920
Secretary 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Process Area Officer 1 28,000.00 336,000.00 1,208.70 581.3 14504.40 350 350 4200 280 560 3360 54180.68 4515.056667 21,993.64 259,754.920
Engineering Officer 1 25,000.00 300,000.00 1,208.70 581.3 14504.40 312.5 312.5 3750 250 500 3000 44686.4 3723.866667 19,882.33 234,059.200
QA/QC Supervisor 1 23,000.00 276,000.00 1,208.70 581.3 14504.40 287.5 287.5 3450 230 460 2760 38821.4 3235.116667 18,436.08 216,464.200
Pollution Control Officer 1 25,000.00 300,000.00 1,208.70 581.3 14504.40 312.5 312.5 3750 250 500 3000 44686.4 3723.866667 19,882.33 234,059.200
Packaging Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Warehouse Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Logistics Head 1 22,000.00 264,000.00 1,208.70 581.3 14504.40 275 275 3300 220 440 2640 35888.9 2990.741667 17,712.96 207,666.700
Process Operator 10 15,000.00 1,800,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 20,406.26 1700.5216 12,230.68 1,761,039.341
Engineering Staff 3 18,000.00 648,000.00 1,208.70 581.3 14504.40 225 225 2700 180 360 2160 150,163.39 12513.616 4,320.08 478,472.208
QA/QC Staff 3 18,000.00 648,000.00 1,208.70 581.3 14504.40 225 225 2700 180 360 2160 150,163.39 12513.616 4,320.08 478,472.208
Pollution Control Staff 2 18,000.00 432,000.00 1,208.70 581.3 14504.40 225 225 2700 180 360 2160 83790.68 6982.556667 9,851.14 328,844.920
Packaging Staff 4 13,000.00 624,000.00 967.70 472.3 11612.40 162.5 162.5 1950 130 260 1560 143,840.83 11986.736 118.46 465,036.768
Warehouse Staff 4 13,000.00 624,000.00 967.70 472.3 11612.40 162.5 162.5 1950 130 260 1560 143,840.83 11986.736 118.46 465,036.768
Logistics Staff 4 14,000.00 672,000.00 1,041.30 508.7 12495.60 175 175 2100 140 280 1680 13,457.95 1121.496 11,914.80 642,266.448
Driver 2 9,000.00 216,000.00 673.00 327 8076.00 112.5 112.5 1350 90 180 1080 26373.5 2197.791667 6,182.71 179,120.500

Human Resource Department

Manager 1 38,000.00 456,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 380 760 4560 89505.68 7458.806667 28,762.39 342,179.920
Secretary 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Recruitment Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
General Service Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Health Officer 1 24,000.00 288,000.00 1,208.70 581.3 14504.40 300 300 3600 240 480 2880 41753.9 3479.491667 19,159.21 225,261.700
Doctor 1 22,000.00 264,000.00 1,208.70 581.3 14504.40 275 275 3300 220 440 2640 35888.9 2990.741667 17,712.96 207,666.700
Dentist 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Nurse 2 14,000.00 336,000.00 1,041.30 508.7 12495.60 175 175 2100 140 280 1680 55917.32 4659.776667 8,376.52 263,807.080
Security Officer 1 13,000.00 156,000.00 967.70 472.3 11612.40 162.5 162.5 1950 130 260 1560 12675.52 1056.293333 11,048.91 128,202.080
Maintenance Officer 1 12,000.00 144,000.00 894.00 436 10728.00 150 150 1800 120 240 1440 10506.4 875.5333333 10,298.47 119,525.600
Training Staff 2 13,000.00 312,000.00 967.70 472.3 11612.40 162.5 162.5 1950 130 260 1560 49219.4 4101.616667 8,003.58 247,658.200
Recruitment Staff 2 12,000.00 288,000.00 894.00 436 10728.00 150 150 1800 120 240 1440 43508 3625.666667 7,548.33 230,524.000
General Service Staff 2 12,000.00 288,000.00 894.00 436 10728.00 150 150 1800 120 240 1440 43508 3625.666667 7,548.33 230,524.000
Security Guard 4 10,000.00 480,000.00 746.70 363.3 8960.40 125 125 1500 100 200 1200 100501.88 8375.156667 936.54 367,837.720
Maintenance Staff 4 9,000.00 432,000.00 673.00 327 8076.00 112.5 112.5 1350 90 180 1080 86448.2 7204.016667 1,176.48 335,045.800

603
 Technological Institute of the Philippines
Finance Department

Manager 1 38,000.00 456,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 380 760 4560 89505.68 7458.806667 28,762.39 342,179.920
Secretary 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Chief Accountant 1 25,000.00 300,000.00 1,208.70 581.3 14504.40 312.5 312.5 3750 250 500 3000 44686.4 3723.866667 19,882.33 234,059.200
Payroll Master 1 18,000.00 216,000.00 1,208.70 581.3 14504.40 225 225 2700 180 360 2160 24158.9 2013.241667 14,820.46 172,476.700
Book Keeper 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Accounting Staff 2 15,000.00 360,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 62433.68 5202.806667 8,728.39 279,011.920
Accounting Clerk 2 15,000.00 360,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 62433.68 5202.806667 8,728.39 279,011.920

Research and Development Department

Manager 1 38,000.00 456,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 380 760 4560 89505.68 7458.806667 28,762.39 342,179.920
Secretary 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Process Developer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Product Developer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Researcher 2 15,000.00 360,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 62433.68 5202.806667 8,728.39 279,011.920

Sales and Marketing Department

Manager 1 38,000.00 456,000.00 1,208.70 581.3 14504.40 437.5 437.5 5250 380 760 4560 89505.68 7458.806667 28,762.39 342,179.920
Secretary 1 16,000.00 192,000.00 1,208.70 581.3 14504.40 200 200 2400 160 320 1920 19135.12 1594.593333 13,304.11 154,040.480
Marketing Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Advertising and Promotion Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Sales Officer 1 20,000.00 240,000.00 1,208.70 581.3 14504.40 250 250 3000 200 400 2400 30023.9 2501.991667 16,266.71 190,071.700
Marketing Staff 2 15,000.00 360,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 62433.68 5202.806667 8,728.39 279,011.920
Advertising and Promotion Staff 2 15,000.00 360,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 62433.68 5202.806667 8,728.39 279,011.920
Sales Staff 4 15,000.00 720,000.00 1,208.70 581.3 14504.40 187.5 187.5 2250 150 300 1800 17,115.65 1426.304 12,504.90 684,329.952

Purchasing Department

Manager 1 30,000.00 360,000.00 1,208.70 581.3 14504.40 375 375 4500 300 600 3600 61218.68 5101.556667 23,342.14 276,176.920
Purchasing Staff 2 13,000.00 312,000.00 967.70 472.3 11612.40 162.5 162.5 1950 130 260 1560 49063.28 4088.606667 8,016.59 247,814.320

604
 Technological Institute of the Philippines

3. Direct Supervisory and Clerical Labor

The total costs for supervision and clerical labor are associated with the total
amount of operating labor, product quality standards, and operation difficulty. These
expenses consume 15 percent of operating labor costs.(M. S. Peters & K. D.
Timmerhaus, 1991)

4. Utilities
The costs for utilities vary mainly with the plant location, amount of
consumption, source. These comprise of the electricity and fuel used in
operation.(M. S. Peters & K. D. Timmerhaus, 1991)

5. Maintenance and Repairs (MR)

The costs for maintenance and repairs are considered to ensure the
efficiency of the operation. These account for the labor, materials, and supervision.
Annual expenses for maintenance and repairs are 2 percent of fixed capital
investment.(M. S. Peters & K. D. Timmerhaus, 1991)
6. Operating Supplies
Operating supplies costs include all miscellaneous supplies needed for
effective operation. The annual expenses for these supplies are 10 percent of the
total cost for maintenance and repairs.(M. S. Peters & K. D. Timmerhaus, 1991)
7. Laboratory Charges
The laboratory charges consist of the expenses for laboratory examinations.
These are considered in the manufacturing cost to ensure the control of operation
and product-quality. These account for 10 percent of the operating labor.(M. S.
Peters & K. D. Timmerhaus, 1991)

B. Fixed Charges
All the expenses which do not vary with time and changes in production
rate, such as taxes, insurance, rent, and depreciation are included in the fixed
charges.

605
 Technological Institute of the Philippines

1. Depreciation
Materials, buildings, and equipment included in manufacturing plant need
a certain amount of initial investment which is disregarded as a manufacturing
expense. Depreciation is the decrease in value that is presumed to arise in order to
write off this cost. Initial cost and salvage value are assumed in order to determine
the rate of depreciation. The annual cost due to depreciation can be obtained
through the difference between the initial cost and salvage value divided by the
total years of useful life. The annual rate of depreciation for machinery and
equipment is 10 percent of the tied-capital investment. Annual depreciation rate of
about 3 percent of the initial cost is for the equipment.(M. S. Peters & K. D.
Timmerhaus, 1991)
Table 15.9 Total Depreciation Cost

Cost, Php Life Depreciation

(Years) Cost(Php/year)
1. Purchased Equipment 134,578,280.33 12 11,214,856.69
2. Equipment Installation 40,373,484.10 12 3,364,457.01
3. Piping and Insulation 13,457,828.03 22 611,719.46
4. Instrumentation and Control 17,495,176.44 12 1,457,931.37
5. Electrical Installation 13,457,828.03 30 448,594.27
6. Service Facilities 67,289,140.16 20 3,364,457.01
7. Buildings and Structures 40,373,484.10 50 807,469.68
Total Depreciation Cost 21,269,485.49

Depreciation: Straight-line Method

Salvage Value: No salvage value (the entire cost of the asset used will depreciated
over the assets useful life)
Life Year: Using table 1 page 271 (Peters & Timmerhaus,1991)

606
 Technological Institute of the Philippines

2. Local Taxes
Plant location and regional laws are considered for the local property taxes.
Annual property taxes for plants in economic zones is 1% of land cost
(80,000,000.00).(M. S. Peters & K. D. Timmerhaus, 1991)
3. Insurance
Rate of insurance basically depends on the process type in manufacturing
operation and on the extent of available protection facilities. This rate is 1 percent
of the fixed-capital investment.(M. S. Peters & K. D. Timmerhaus, 1991)

C. Plant Overhead Cost

Plant-overhead costs are somewhat similar to the fixed charges that they do
not vary with time and changes in the operation. These expenses are for safety,
medical services, warehouse, packaging, insurance, laboratories, payroll overhead
including pensions and vacation allowances, recreation facilities, and employee
benefits. Plant-overhead cost is 5 percent of total product cost.

I. General Expenses
It is the other expenses involved in the companys operation.
A. Administrative Cost
The expenses associated with the administrative activities cannot be
included in the manufacturing costs. Salaries for administrators, secretaries,
accountants, staffs and workers are element of administrative costs, together with
the office supplies and administrative buildings. These costs are 3.5 percent of the
total product cost.(M. S. Peters & K. D. Timmerhaus, 1991)
B. Distribution and Marketing Costs
It is necessary to consider the expenses involve in selling the products to
ensure a profitable success of manufacturing operation. Salaries, supplies,
commission, travel, shipment, advertising, and technical services are included in
these expenses. The marketing cost is 2 percent of the total product cost .(M. S.
Peters & K. D. Timmerhaus, 1991)

607
 Technological Institute of the Philippines

C. Research and Development Costs

Research and development must be taken into account for new process and
product quality improvement. Salaries, supplies, and miscellaneous costs comprise
the research and development expenses, which is 3 percent of every product sales
or 5 percent of the total product cost.(M. S. Peters & K. D. Timmerhaus, 1991)

Table 15.10 Estimation of Total Product Cost

Total Product Cost

Cost (Php)
I. Manufacturing Cost
A. Direct Costs
1. Raw Materials - 166,888,873.20
2. Utilities - 27,885,990.35
3. Operating Labor - 21,576,000.00
4. Maintenance and repairs 0.02FCI 10,589,082.16
5. Operating Supplies 0.10MR 1,058,908.22
6. Laboratory Charges 0.10 OL 2,157,600.00
Total Direct Production Cost 230,156,453.93
B. Fixed Costs
1. Depreciation - 21,269,485.49
2. Local taxes 0.01 LC 840,000.00
3. Insurance 0.04FCI 52,945,410.79
Total Fixed Charges 75,054,896.27
C. Plant Overhead Cost 0.5(OL,MR) 16,082,541.08
Total Manufacturing Cost 321,293,891.28
II. General Expense
A. Administrative Cost 0.02 OL 4,315,200.00
B. Distribution and Marketing Cost 0.02 DC 4,603,129.08
C. Research and Development Cost 0.05 MC 16,064,694.56
Total General Expense 24,983,023.64
Total Product Cost 346,276,914.92

608
 Technological Institute of the Philippines

CASH FLOW SENSITIVITY ANALYSIS

Capital Stock (From Management Study)
Capital = Php 300,000,000.00

Loan (Total Product Cost: Financing)

Ordinary Annuity:

A[(1 + i)n 1]
P1 =
(1 + i)n i

A[(1 + 0.06)8 1]
P1 =
(1 + 0.06)8 (0.06)

P1 = 6.2098A

Deferred Annuity:

P1 = P2 (1 + i)m

6.2098A = 600,000,000 (1 + 0.06)4

A = 121982378.8

i = interest = 6%
Loan Interest per Annum: 6% (Bank of the Philippine Island)
Source: Retrieved from (http://www.bsp.gov.ph/statistics/keystat/intrates.htm)
n = Ordinary Annuity Periods = 8
m = Deferred Periods = 4

609
 Technological Institute of the Philippines

Table 15.11 Payment on Loan

Year Payment
2017 -
2018 -
2019 -
2020 121982378.8
2021 121982378.8
2022 121982378.8
2023 121982378.8
2024 121982378.8
2025 121982378.8
2026 121982378.8
2027 121982378.8

Annual Sales
Current Price (Price on year 2018 from Market Feasibility Study)
Hydrogen Fluoride : Php 250.00 / kg which is equivalent to Php 902.06 per gallon.
Using Pricing and Breakeven Analysis Excel, Optimum Price was calculated and used for
financial study. Annual sales is shown in Table 15.12, assuming 100% utilization on the
first year.

Table 15.12. Sales using Optimum Price

Product kg/yr Price (Php/kg) Cost (Php)
Hydrogen Fluoride 1,233,720 287.50 354,694,500

Rate of price increase per year: 10% ( From market Feasibilty Study. Historical data shows
that there is a 10% increase in price per year)
Utilization: 80% on the first year; 90% on second year; and 100% on the following years.

Cash Flow analysis is calculated every end of the month. That includes 11 months of the
year and the last month years income and expenses.

610
 Technological Institute of the Philippines

Table 15.13. Cash Flow Sensitivity Analysis for December 31, 2017

CASH FLOW SENSITIVITY ANALYSIS

December 31 2017
(ASSUMES 5% CHANGE IN RECEIPTS AND DISBURSEMENTS)

Pessimistic Expected Optimistic

Cash Flow Cash Flow Cash Flow
Beginning Cash Balance 300,000,000.00 300,000,000.00 300,000,000.00
Cash Inflows (Income):
Accts. Rec. Collections - - -
Loan Proceeds 600,000,000.00 600,000,000.00 600,000,000.00
Total Cash Inflows 600,000,000.00 600,000,000.00 600,000,000.00
Available Cash Balance 900,000,000.00 900,000,000.00 900,000,000.00
Cash Outflows (Expenses):
Advertising 24,756,579.30 23,577,694.57 22,398,809.84
Delivery & Pick-up Charges - - -
Health Insurance, Phil Health 196,592.94 187,231.37 177,869.80
Insurance, Social Security System 915,756.60 872,149.14 828,541.68
Insurance, Building 13,898,170.33 13,236,352.70 12,574,535.06
Interest + Loan Payment - - -
Inventory Purchases 7,301,388.20 6,953,703.05 6,606,017.90
Miscellaneous 448,278.07 426,931.49 405,584.92
Office Supplies 3,775.80 3,596.00 3,416.20
Payroll 7,279,871.97 6,933,211.40 6,586,550.83
Payroll Taxes 3,781,512.12 3,601,440.12 3,421,368.11
Prior Accounts Payable - - -
Prior Income Tax Payable - - -
Professional Fees 2,260,915.11 2,153,252.49 2,045,589.86
Repairs & Maintenance 8,600,190.30 8,190,657.43 7,781,124.56
Research and Development 30,945,724.12 29,472,118.21 27,998,512.30
Services 1,766,339.93 1,682,228.50 1,598,117.08
Utilities & Telephone 1,220,012.08 1,161,916.26 1,103,820.45
Other 9,283,717.24 8,841,635.46 8,399,553.69
Subtotal 112,658,824.10 107,294,118.20 101,929,412.29
Other Cash Out Flows:
Capital Purchases 141,307,194.34 134,578,280.33 127,849,366.31
Building Construction 42,392,158.30 40,373,484.10 38,354,809.89
Contigencies 52,283,661.91 49,793,963.72 47,304,265.53
Decorating 47,097,344.52 44,854,613.83 42,611,883.13
Install Fixtures & Equip. 89,023,532.44 84,784,316.61 80,545,100.78
Interiors and Fixtures 259,035,394.84 246,700,376.04 234,365,357.24
Land 88,200,000.00 84,000,000.00 79,800,000.00
Subtotal 719,339,286.35 685,085,034.62 650,830,782.89
Total Cash Outflows 831,998,110.45 792,379,152.81 752,760,195.17
Ending Cash Balance 68,001,889.55 107,620,847.19 147,239,804.83

611
 Technological Institute of the Philippines

Table 15.14. Cash Flow Sensitivity Analysis for December 31, 2018

CASH FLOW SENSITIVITY ANALYSIS

December 31 2018
(ASSUMES 5% CHANGE IN RECEIPTS AND DISBURSEMENTS)

Pessimistic Expected Optimistic

Cash Flow Cash Flow Cash Flow
Beginning Cash Balance 67,946,272.07 107,567,878.16 147,189,484.25
Cash Inflows (Income):
Accts. Rec. Collections 242,611,038.00 255,380,040.00 268,149,042.00
Prior Accounts Receivables - - -
Total Cash Inflows 242,611,038.00 255,380,040.00 268,149,042.00
Available Cash Balance 310,557,310.07 362,947,918.16 415,338,526.25
Cash Outflows (Expenses):
Advertising 25,994,408.26 24,756,579.30 23,518,750.33
Delivery & Pick-up Charges 6,189,144.82 5,894,423.64 5,599,702.46
Health Insurance, Phil Health 227,064.85 216,252.24 205,439.62
Insurance, Social Security System 1,057,698.87 1,007,332.26 956,965.65
Insurance, Building 15,287,987.37 14,559,987.97 13,831,988.57
Interest + Loan Payment - - -
Inventory Purchases 8,031,527.02 7,649,073.36 7,266,619.69
Miscellaneous 3,683,351.45 3,507,953.76 3,332,556.08
Office Supplies 4,153.38 3,955.60 3,757.82
Payroll 8,735,846.37 8,319,853.68 7,903,861.00
Payroll Taxes 4,033,612.93 3,841,536.12 3,649,459.32
Prior Accounts Payable 9,758,826.11 9,758,826.11 9,758,826.11
Prior Income Tax Payable - - -
Professional Fees 4,659,118.06 4,437,255.30 4,215,392.53
Repairs & Maintenance 10,320,228.36 9,828,788.91 9,337,349.47
Research and Development 34,040,296.53 32,419,330.03 30,798,363.53
Services 2,355,119.91 2,242,971.34 2,130,822.77
Utilities & Telephone 1,464,014.49 1,394,299.52 1,324,584.54
Other 18,567,434.47 17,683,270.93 16,799,107.38
Total Cash Outflows 154,409,833.26 147,521,690.06 140,633,546.86
Ending Cash Balance 156,147,476.81 215,426,228.10 274,704,979.39

612
 Technological Institute of the Philippines

Table 15.15. Cash Flow Sensitivity Analysis for December 31, 2019

CASH FLOW SENSITIVITY ANALYSIS

December 31 2019

(ASSUMES 5% CHANGE IN RECEIPTS AND DISBURSEMENTS)

Pessimistic Expected Optimistic

Cash Flow Cash Flow Cash Flow
Beginning Cash Balance 156,147,476.81 215,426,228.10 274,704,979.39
Cash Inflows (Income):
Accts. Rec. Collections 309,712,143.51 316,032,799.50 331,834,439.48
Prior Accounts Receivables 242,611,038.00 255,380,040.00 268,149,042.00
Total Cash Inflows 552,323,181.51 571,412,839.50 599,983,481.48
Available Cash Balance 708,470,658.32 786,839,067.60 874,688,460.86
Cash Outflows (Expenses):
Advertising 27,232,237.23 25,935,464.02 24,638,690.82
Delivery & Pick-up Charges 7,426,973.79 7,073,308.37 6,719,642.95
Health Insurance, Phil Health 249,771.33 237,877.46 225,983.59
Insurance, Social Security System 1,163,468.76 1,108,065.48 1,052,662.21
Insurance, Building 16,816,786.10 16,015,986.76 15,215,187.43
Interest + Loan Payment - - -
Inventory Purchases 8,031,527.02 7,649,073.36 7,266,619.69
Miscellaneous 4,051,686.60 3,858,749.14 3,665,811.68
Office Supplies 4,530.96 4,315.20 4,099.44
Payroll 8,007,859.17 7,626,532.54 7,245,205.92
Payroll Taxes 4,159,663.33 3,961,584.13 3,763,504.92
Prior Accounts Payable 12,523,896.72 12,523,896.72 12,523,896.72
Prior Income Tax Payable - - -
Professional Fees 2,562,370.46 2,440,352.82 2,318,335.18
Repairs & Maintenance 1,482,471.50 1,411,877.62 1,341,283.74
Research and Development 37,134,868.94 35,366,541.85 33,598,214.76
Services 2,943,899.88 2,803,714.17 2,663,528.46
Utilities & Telephone 1,708,016.91 1,626,682.77 1,545,348.63
Other 22,280,921.37 21,219,925.11 20,158,928.86
Total Cash Outflows 157,780,950.08 150,863,947.54 143,946,944.99
Ending Cash Balance 550,689,708.24 635,975,120.06 730,741,515.87

613
 Technological Institute of the Philippines

Table 15.16. Cash Flow Sensitivity Analysis for December 31, 2020

CASH FLOW SENSITIVITY ANALYSIS

December 31 2020

(ASSUMES 5% CHANGE IN RECEIPTS AND DISBURSEMENTS)

Pessimistic Expected Optimistic

Cash Flow Cash Flow Cash Flow
Beginning Cash Balance 550,689,708.24 635,975,120.06 730,741,515.87
Cash Inflows (Income):
Accts. Rec. Collections 346,563,128.59 364,803,293.25 383,043,457.91
Prior Accounts Receivables 300,231,159.53 316,032,799.50 331,834,439.48
Total Cash Inflows 646,794,288.11 680,836,092.75 714,877,897.39
Available Cash Balance 1,197,483,996.36 1,316,811,212.81 1,445,619,413.26
Cash Outflows (Expenses):
Advertising 28,470,066.19 27,114,348.75 25,758,631.32
Delivery & Pick-up Charges 8,664,802.75 8,252,193.10 7,839,583.44
Health Insurance, Phil Health 274,748.47 261,665.21 248,581.95
Insurance, Social Security System 1,279,815.63 1,218,872.03 1,157,928.43
Insurance, Building 18,498,464.71 17,617,585.44 16,736,706.17
Interest + Loan Payment 121,982,378.82 121,982,378.82 121,982,378.82
Inventory Purchases 9,491,804.66 9,039,813.97 8,587,823.27
Miscellaneous 4,862,023.92 4,630,498.97 4,398,974.02
Office Supplies 5,286.12 5,034.40 4,782.68
Payroll 10,191,820.76 9,706,495.96 9,221,171.16
Payroll Taxes 4,285,713.74 4,081,632.13 3,877,550.52
Prior Accounts Payable 12,576,368.26 12,576,368.26 12,576,368.26
Prior Income Tax Payable - - -
Professional Fees 2,637,734.29 2,512,127.90 2,386,521.50
Repairs & Maintenance 1,575,125.97 1,500,119.97 1,425,113.97
Research and Development 40,229,441.36 38,313,753.67 36,398,065.99
Services 4,121,459.84 3,925,199.84 3,728,939.85
Utilities & Telephone 1,952,019.32 1,859,066.02 1,766,112.72
Other 25,994,408.26 24,756,579.30 23,518,750.33
Total Cash Outflows 297,093,483.08 289,353,733.74 281,613,984.41
Ending Cash Balance 900,390,513.28 1,027,457,479.07 1,164,005,428.85

614
 Technological Institute of the Philippines

Table 15.17. Cash Flow Sensitivity Analysis for December 31, 2021

CASH FLOW SENSITIVITY ANALYSIS

December 31 2021

(ASSUMES 5% CHANGE IN RECEIPTS AND DISBURSEMENTS)

Pessimistic Expected Optimistic

Cash Flow Cash Flow Cash Flow
Beginning Cash Balance 900,390,513.28 1,027,457,479.07 1,164,005,428.85
Cash Inflows (Income):
Accts. Rec. Collections 403,644,114.47 424,888,541.55 446,132,968.63
Prior Accounts Receivables 346,563,128.59 364,803,293.25 383,043,457.91
Total Cash Inflows 750,207,243.06 789,691,834.80 829,176,426.54
Available Cash Balance 1,650,597,756.34 1,817,149,313.87 1,993,181,855.39
Cash Outflows (Expenses):
Advertising 29,707,895.16 28,293,233.48 26,878,571.81
Delivery & Pick-up Charges 9,902,631.72 9,431,077.83 8,959,523.94
Health Insurance, Phil Health 302,223.31 287,831.73 273,440.14
Insurance, Social Security System 1,407,797.20 1,340,759.24 1,273,721.27
Insurance, Building 20,348,311.18 19,379,343.98 18,410,376.78
Interest + Loan Payment 121,982,378.82 121,982,378.82 121,982,378.82
Inventory Purchases 48,189,162.14 45,894,440.13 43,599,718.12
Miscellaneous 5,981,309.73 5,696,485.46 5,411,661.18
Office Supplies 24,920.28 23,733.60 22,546.92
Payroll 11,647,795.16 11,093,138.24 10,538,481.33
Payroll Taxes 4,537,814.54 4,321,728.14 4,105,641.73
Prior Accounts Payable 14,072,271.52 14,072,271.52 14,072,271.52
Prior Income Tax Payable - - -
Professional Fees 2,713,098.13 2,583,902.98 2,454,707.83
Repairs & Maintenance 1,667,780.44 1,588,362.32 1,508,944.21
Research and Development 43,324,013.77 41,260,965.49 39,197,917.22
Services 4,121,459.84 3,925,199.84 3,728,939.85
Utilities & Telephone 2,684,026.57 2,556,215.78 2,428,404.99
Other 29,707,895.16 28,293,233.48 26,878,571.81
Total Cash Outflows 352,322,784.65 342,024,302.07 331,725,819.48
Ending Cash Balance 1,298,274,971.69 1,475,125,011.81 1,661,456,035.91

615
 Technological Institute of the Philippines

Table 15.18. Cash Flow Sensitivity Analysis for December 31, 2022

CASH FLOW SENSITIVITY ANALYSIS

December 31 2022

(ASSUMES 5% CHANGE IN RECEIPTS AND DISBURSEMENTS)

Pessimistic Expected Optimistic

Cash Flow Cash Flow Cash Flow
Beginning Cash Balance 1,298,274,971.69 1,475,125,011.81 1,661,456,035.91
Cash Inflows (Income):
Accts. Rec. Collections 468,675,666.25 493,342,806.58 518,009,946.91
Prior Accounts Receivables 403,644,114.47 424,888,541.55 446,132,968.63
Total Cash Inflows 872,319,780.72 918,231,348.13 964,142,915.53
Available Cash Balance 2,170,594,752.41 2,393,356,359.93 2,625,598,951.44
Cash Outflows (Expenses):
Advertising 30,945,724.12 29,472,118.21 27,998,512.30
Delivery & Pick-up Charges 55,702,303.42 53,049,812.78 50,397,322.14
Health Insurance, Phil Health 332,445.64 316,614.90 300,784.15
Insurance, Social Security System 1,548,576.92 1,474,835.16 1,401,093.40
Insurance, Building 22,383,142.30 21,317,278.38 20,251,414.46
Interest + Loan Payment 121,982,378.82 121,982,378.82 121,982,378.82
Inventory Purchases 48,919,300.96 46,589,810.44 44,260,319.91
Miscellaneous 6,163,014.67 5,869,537.78 5,576,060.89
Office Supplies 25,297.86 24,093.20 22,888.54
Payroll 58,934,526.93 56,128,120.88 53,321,714.84
Payroll Taxes 14,369,746.06 13,685,472.44 13,001,198.82
Prior Accounts Payable 18,724,513.79 18,724,513.79 18,724,513.79
Prior Income Tax Payable - - -
Professional Fees 5,049,377.08 4,808,930.55 4,568,484.02
Repairs & Maintenance 95,011,617.36 90,487,254.63 85,962,891.89
Research and Development 46,418,586.18 44,208,177.32 41,997,768.45
Services 39,448,258.42 37,569,769.92 35,691,281.43
Utilities & Telephone 16,348,161.84 15,569,677.95 14,791,194.05
Other 124,401,810.96 118,477,915.20 112,554,019.44
Total Cash Outflows 706,708,783.33 679,756,312.34 652,803,841.36
Ending Cash Balance 1,463,885,969.08 1,713,600,047.59 1,972,795,110.09

616
 Technological Institute of the Philippines

Table 15.19. Cash Flow Sensitivity Analysis for December 31, 2023

CASH FLOW SENSITIVITY ANALYSIS

December 31 2023

(ASSUMES 5% CHANGE IN RECEIPTS AND DISBURSEMENTS)

Pessimistic Expected Optimistic

Cash Flow Cash Flow Cash Flow
Beginning Cash Balance 1,463,885,969.08 1,713,600,047.59 1,972,795,110.09
Cash Inflows (Income):
Accts. Rec. Collections 515,543,232.87 542,677,087.24 569,810,941.60
Prior Accounts Receivables 468,675,666.25 493,342,806.58 518,009,946.91
Total Cash Inflows 984,218,899.12 1,036,019,893.81 1,087,820,888.50
Available Cash Balance 2,448,104,868.20 2,749,619,941.40 3,060,615,998.59
Cash Outflows (Expenses):
Advertising 32,183,553.09 30,651,002.94 29,118,452.79
Delivery & Pick-up Charges 58,796,875.83 55,997,024.60 53,197,173.37
Health Insurance, Phil Health 365,690.21 348,276.39 330,862.57
Insurance, Social Security System 1,703,434.61 1,622,318.68 1,541,202.74
Insurance, Building 24,621,456.53 23,449,006.22 22,276,555.91
Interest + Loan Payment 121,982,378.82 121,982,378.82 121,982,378.82
Inventory Purchases 49,649,439.78 47,285,180.74 44,920,921.70
Miscellaneous 6,925,990.87 6,596,181.78 6,266,372.69
Office Supplies 25,675.44 24,452.80 23,230.16
Payroll 116,877,482.44 111,311,888.04 105,746,293.64
Payroll Taxes 14,495,796.46 13,805,520.44 13,115,244.42
Prior Accounts Payable 49,004,492.70 49,004,492.70 49,004,492.70
Prior Income Tax Payable 33,358,181.00 33,358,181.00 33,358,181.00
Professional Fees 5,124,740.91 4,880,705.63 4,636,670.35
Repairs & Maintenance 105,203,772.67 100,194,069.21 95,184,365.75
Research and Development 49,513,158.59 47,155,389.14 44,797,619.68
Services 40,037,038.40 38,130,512.76 36,223,987.12
Utilities & Telephone 16,592,164.26 15,802,061.20 15,011,958.14
Other 126,258,554.41 120,246,242.30 114,233,930.18
Total Cash Outflows 852,719,877.03 821,844,885.38 790,969,893.74
Ending Cash Balance 1,595,384,991.18 1,927,775,056.02 2,269,646,104.85

617
 Technological Institute of the Philippines

Table 15.20. Cash Flow Sensitivity Analysis for December 31, 2024

CASH FLOW SENSITIVITY ANALYSIS

December 31 2024

(ASSUMES 5% CHANGE IN RECEIPTS AND DISBURSEMENTS)

Pessimistic Expected Optimistic

Cash Flow Cash Flow Cash Flow
Beginning Cash Balance 1,595,384,991.18 1,927,775,056.02 2,269,646,104.85
Cash Inflows (Income):
Accts. Rec. Collections 567,097,556.16 596,944,795.96 626,792,035.76
Prior Accounts Receivables 515,543,232.87 542,677,087.24 569,810,941.60
Total Cash Inflows 1,082,640,789.03 1,139,621,883.19 1,196,602,977.35
Available Cash Balance 2,678,025,780.21 3,067,396,939.21 3,466,249,082.20
Cash Outflows (Expenses):
Advertising 33,421,382.05 31,829,887.67 30,238,393.28
Delivery & Pick-up Charges 61,891,448.24 58,944,236.42 55,997,024.60
Health Insurance, Phil Health 402,259.23 383,104.03 363,948.83
Insurance, Social Security System 1,873,778.07 1,784,550.54 1,695,323.02
Insurance, Building 27,083,602.18 25,793,906.84 24,504,211.50
Interest + Loan Payment 121,982,378.82 121,982,378.82 121,982,378.82
Inventory Purchases 50,379,578.60 47,980,551.05 45,581,523.49
Miscellaneous 7,027,843.67 6,693,184.45 6,358,525.23
Office Supplies 26,053.02 24,812.40 23,571.78
Payroll 108,744,757.62 103,566,435.83 98,388,114.04
Payroll Taxes 14,621,846.87 13,925,568.44 13,229,290.02
Prior Accounts Payable 56,136,348.44 56,136,348.44 56,136,348.44
Prior Income Tax Payable 35,601,542.91 35,601,542.91 35,601,542.91
Professional Fees 5,200,104.75 4,952,480.72 4,704,856.68
Repairs & Maintenance 97,883,343.49 93,222,231.90 88,561,120.30
Research and Development 52,607,731.00 50,102,600.96 47,597,470.91
Services 40,625,818.37 38,691,255.59 36,756,692.81
Utilities & Telephone 16,836,166.67 16,034,444.45 15,232,722.23
Other 128,115,297.86 122,014,569.39 115,913,840.92
Total Cash Outflows 860,461,281.88 829,664,090.85 798,866,899.81
Ending Cash Balance 1,817,564,498.33 2,237,732,848.36 2,667,382,182.39

618
 Technological Institute of the Philippines

Table 15.21. Cash Flow Sensitivity Analysis for December 31, 2025

CASH FLOW SENSITIVITY ANALYSIS

December 31 2025

(ASSUMES 5% CHANGE IN RECEIPTS AND DISBURSEMENTS)

Pessimistic Expected Optimistic

Cash Flow Cash Flow Cash Flow
Beginning Cash Balance 1,817,564,498.33 2,237,732,848.36 2,667,382,182.39
Cash Inflows (Income):
Accts. Rec. Collections 623,807,311.78 656,639,275.55 689,471,239.33
Prior Accounts Receivables 567,097,556.16 596,944,795.96 626,792,035.76
Total Cash Inflows 1,190,904,867.94 1,253,584,071.51 1,316,263,275.09
Available Cash Balance 3,008,469,366.27 3,491,316,919.88 3,983,645,457.48
Cash Outflows (Expenses):
Advertising 34,659,211.01 33,008,772.40 31,358,333.78
Delivery & Pick-up Charges 64,986,020.65 61,891,448.24 58,796,875.83
Health Insurance, Phil Health 2,183,473.47 2,079,498.54 1,975,523.61
Insurance, Social Security System 11,641,215.49 11,086,871.89 10,532,528.30
Insurance, Building 32,429,064.11 30,884,822.96 29,340,581.81
Interest + Loan Payment 121,982,378.82 121,982,378.82 121,982,378.82
Inventory Purchases 51,109,717.42 48,675,921.35 46,242,125.28
Miscellaneous 7,129,696.48 6,790,187.13 6,450,677.77
Office Supplies 26,430.60 25,172.00 23,913.40
Payroll 110,375,928.98 105,119,932.37 99,863,935.75
Payroll Taxes 14,747,897.27 14,045,616.45 13,343,335.63
Prior Accounts Payable 55,994,892.79 55,994,892.79 55,994,892.79
Prior Income Tax Payable 41,511,191.45 41,511,191.45 41,511,191.45
Professional Fees 5,275,468.59 5,024,255.80 4,773,043.01
Repairs & Maintenance 99,351,593.64 94,620,565.37 89,889,537.11
Research and Development 55,702,303.42 53,049,812.78 50,397,322.14
Services 41,214,598.35 39,251,998.43 37,289,398.51
Utilities & Telephone 17,080,169.09 16,266,827.70 15,453,486.32
Other 129,972,041.31 123,782,896.48 117,593,751.66
Total Cash Outflows 897,373,292.93 865,093,062.94 832,812,832.94
Ending Cash Balance 2,111,096,073.33 2,626,223,856.94 3,150,832,624.53

619
 Technological Institute of the Philippines

Table 15.22. Cash Flow Sensitivity Analysis for December 31, 2026

CASH FLOW SENSITIVITY ANALYSIS

December 31 2026

(ASSUMES 5% CHANGE IN RECEIPTS AND DISBURSEMENTS)

Pessimistic Expected Optimistic

Cash Flow Cash Flow Cash Flow
Beginning Cash Balance 2,111,096,073.33 2,626,223,856.94 3,150,832,624.53
Cash Inflows (Income):
Accts. Rec. Collections 686,188,042.95 722,303,203.11 758,418,363.27
Prior Accounts Receivables 654,997,677.37 689,471,239.33 723,944,801.30
Total Cash Inflows 1,341,185,720.32 1,411,774,442.44 1,482,363,164.56
Available Cash Balance 3,452,281,793.65 4,037,998,299.38 4,633,195,789.10
Cash Outflows (Expenses):
Advertising 35,897,039.98 34,187,657.12 32,478,274.27
Delivery & Pick-up Charges 68,080,593.07 64,838,660.06 61,596,727.06
Health Insurance, Phil Health 2,183,473.47 2,079,498.54 1,975,523.61
Insurance, Social Security System 11,641,215.49 11,086,871.89 10,532,528.30
Insurance, Building 32,429,064.11 30,884,822.96 29,340,581.81
Interest + Loan Payment 121,982,378.82 121,982,378.82 121,982,378.82
Inventory Purchases 51,109,717.42 48,675,921.35 46,242,125.28
Miscellaneous 7,231,549.29 6,887,189.80 6,542,830.31
Office Supplies 26,430.60 25,172.00 23,913.40
Payroll 112,031,567.92 106,696,731.35 101,361,894.78
Payroll Taxes 14,873,947.67 14,165,664.45 13,457,381.23
Prior Accounts Payable 58,691,327.26 58,691,327.26 58,691,327.26
Prior Income Tax Payable 46,385,898.51 46,385,898.51 46,385,898.51
Professional Fees 5,275,468.59 5,024,255.80 4,773,043.01
Repairs & Maintenance 100,841,867.55 96,039,873.86 91,237,880.16
Research and Development 58,487,418.59 55,702,303.42 52,917,188.25
Services 41,803,378.33 39,812,741.26 37,822,104.20
Utilities & Telephone 17,080,169.09 16,266,827.70 15,453,486.32
Other 129,972,041.31 123,782,896.48 117,593,751.66
Total Cash Outflows 916,024,547.05 883,216,692.65 850,408,838.24
Ending Cash Balance 2,536,257,246.61 3,154,781,606.74 3,782,786,950.85

620
 Technological Institute of the Philippines

INCOME STATEMENT
Income Tax Rate: 30% (starting 5th year) of gross profit
Source: Retrieved from
(http://www.peza.gove.ph/index.php/eligible-activities-incentives/fiscal-incentives)

Cost of Goods Sold: Total Variable Cost

Net Sales: Annual Sales
Gross Profit = Net sales Cost of Goods Sold

Table 15.23. Projected Income Statement for December 31, 2017-2018

HydroFluor Philippines
Income Statement
2017 2018 Variance
Revenue
Net Sales - 255,380,040.00 (255,380,040.00)
Cost of Goods Sold 7,095,951.32 39,020,776.86 (31,924,825.53)
Gross Profit (7,095,951.32) 216,359,263.14 (223,455,214.47)
Operating Expenses
Advertising Expenses 23,577,694.57 24,756,579.30 (1,178,884.73)
Process Aids and
Packaging 4,184,161.08 13,717,800.30 (9,533,639.22)
Research and
Development 29,472,118.21 32,419,330.03 (2,947,211.82)
Loan - - -
Depreciation Expence 21,269,485.49 42,538,970.97 (21,269,485.49)
Other 882,002.92 (11,231,685.91) 12,113,688.82
Total Operating
Expenses 79,385,462.26 102,200,994.70 (22,815,532.44)
Income From
Operations (86,481,413.58) 114,158,268.45 (200,639,682.03)
Income Tax
Expense - - -

Net Income (86,481,414) 114,158,268 (200,639,682)

621
 Technological Institute of the Philippines

Table 15.24. Projected Income Statement for December 31, 2018-2019

HydroFluor Philippines
Income Statement
2018 2019 Variance
Revenue
Net Sales 255,380,040.00 571,412,839.50 (316,032,799.50)
Cost of Goods Sold 39,020,776.86 29,983,372.04 9,037,404.82
Gross Profit 216,359,263.14 541,429,467.46 (325,070,204.32)
Operating Expenses
Advertising Expenses 24,756,579.30 25,935,464.02 (1,178,884.73)

Process Aids and Packaging 13,717,800.30 13,437,136.76 280,663.55

Research and Development 32,419,330.03 35,366,541.85 (2,947,211.82)

Loan - - -
Depreciation Expence 42,538,970.97 63,808,456.46 (21,269,485.49)
Other (11,231,685.91) (28,988,230.46) 17,756,544.55

Total Operating Expenses 102,200,994.70 109,559,368.64 (7,358,373.94)

Income From Operations 114,158,268.45 431,870,098.83 (317,711,830.38)

Income Tax Expense - - -

Net Income 114,158,268 431,870,099 (317,711,830)

622
 Technological Institute of the Philippines

Table 15.25. Projected Income Statement for December 31, 2019-2020

HydroFluor Philippines
Income Statement
2019 2020 Variance
Revenue
Net Sales 571,412,839.50 680,836,092.75 (109,423,253.25)
Cost of Goods Sold 29,983,372.04 35,239,853.09 (5,256,481.05)
Gross Profit 541,429,467.46 645,596,239.66 (104,166,772.20)
Operating Expenses
Advertising Expenses 25,935,464.02 27,114,348.75 (1,178,884.73)

Process Aids and Packaging 13,437,136.76 16,024,931.83 (2,587,795.07)

Research and Development 35,366,541.85 38,313,753.67 (2,947,211.82)

Loan - 108,563,991.10 (108,563,991.10)
Depreciation Expence 63,808,456.46 85,077,941.94 (21,269,485.49)
Other (28,988,230.46) (46,585,938.77) 17,597,708.32

Total Operating Expenses 109,559,368.64 228,509,028.52 (118,949,659.89)

Income From Operations 431,870,098.83 417,087,211.14 14,782,887.69

Income Tax Expense - - -

Net Income 431,870,099 417,087,211 14,782,888

623
 Technological Institute of the Philippines

Table 15.26. Projected Income Statement for December 31, 2020-2021

HydroFluor Philippines
Income Statement
2020 2021 Variance
Revenue
Net Sales 680,836,092.75 789,691,834.80 (108,855,742.05)
Cost of Goods Sold 35,239,853.09 79,421,121.42 (44,181,268.34)
Gross Profit 645,596,239.66 710,270,713.38 (64,674,473.71)
Operating Expenses
Advertising Expenses 27,114,348.75 28,293,233.48 (1,178,884.73)

Process Aids and Packaging 16,024,931.83 17,389,287.98 (1,364,356.16)

Research and Development 38,313,753.67 41,260,965.49 (2,947,211.82)

Loan 108,563,991.10 108,563,991.10 -
Depreciation Expence 85,077,941.94 106,347,427.43 (21,269,485.49)
Other (46,585,938.77) (64,008,927.24) 17,422,988.46

Total Operating Expenses 228,509,028.52 237,845,978.26 (9,336,949.73)

Income From Operations 417,087,211.14 472,424,735.12 (55,337,523.98)

Income Tax Expense - - -

Net Income 417,087,211 472,424,735 (55,337,524)

624
 Technological Institute of the Philippines

Table 15.27. Projected Income Statement for December 31, 2021-2022

HydroFluor Philippines
Income Statement
2021 2022 Variance
Revenue
Net Sales 789,691,834.80 918,231,348.13 (128,539,513.33)
Cost of Goods Sold 79,421,121.42 251,067,728.04 (171,646,606.61)
Gross Profit 710,270,713.38 667,163,620.09 43,107,093.29
Operating Expenses
Advertising Expenses 28,293,233.48 29,472,118.21 (1,178,884.73)

Process Aids and Packaging 17,389,287.98 104,103,832.64 (86,714,544.66)

Research and Development 41,260,965.49 44,208,177.32 (2,947,211.82)

Loan 108,563,991.10 108,563,991.10 -
Depreciation Expence 106,347,427.43 127,616,912.92 (21,269,485.49)
Other (64,008,927.24) 13,285,397.09 (77,294,324.33)

Total Operating Expenses 237,845,978.26 427,250,429.27 (189,404,451.02)

Income From Operations 472,424,735.12 239,913,190.82 232,511,544.31

Income Tax Expense - 33,358,181.00 (33,358,181.00)

Net Income 472,424,735 206,555,010 265,869,725

625
 Technological Institute of the Philippines

Table 15.28. Projected Income Statement for December 31, 2022-2023

HydroFluor Philippines
Income Statement
2022 2023 Variance
Revenue
Net Sales 918,231,348.13 1,036,019,893.81 (117,788,545.69)
Cost of Goods Sold 251,067,728.04 323,989,035.57 (72,921,307.53)
Gross Profit 667,163,620.09 712,030,858.24 (44,867,238.15)
Operating Expenses
Advertising Expenses 29,472,118.21 30,651,002.94 (1,178,884.73)

Process Aids and Packaging 104,103,832.64 108,008,992.35 (3,905,159.71)

Research and Development 44,208,177.32 47,155,389.14 (2,947,211.82)

Loan 108,563,991.10 108,563,991.10 -
Depreciation Expence 127,616,912.92 148,886,398.40 (21,269,485.49)
Other 13,285,397.09 (5,663,072.60) 18,948,469.70

Total Operating Expenses 427,250,429.27 437,602,701.33 (10,352,272.05)

Income From Operations 239,913,190.82 274,428,156.91 (34,514,966.10)

Income Tax Expense 33,358,181.00 35,601,542.91 (2,243,361.91)

Net Income 206,555,010 238,826,614 (32,271,604)

626
 Technological Institute of the Philippines

Table 15.29. Projected Income Statement for December 31, 2023-2024

HydroFluor Philippines
Income Statement
2023 2024 Variance
Revenue
Net Sales 1,036,019,893.81 1,139,621,883.19 (103,601,989.38)
Cost of Goods Sold 323,989,035.57 309,398,054.28 14,590,981.29
Gross Profit 712,030,858.24 830,223,828.91 (118,192,970.67)
Operating Expenses
Advertising Expenses 30,651,002.94 31,829,887.67 (1,178,884.73)

Process Aids and Packaging 108,008,992.35 111,914,152.07 (3,905,159.71)

Research and Development 47,155,389.14 50,102,600.96 (2,947,211.82)

Loan 108,563,991.10 108,563,991.10 -
Depreciation Expence 148,886,398.40 148,886,398.40 -
Other (5,663,072.60) (1,175,915.10) (4,487,157.51)

Total Operating Expenses 437,602,701.33 450,121,115.10 (12,518,413.77)

Income From Operations 274,428,156.91 380,102,713.82 (105,674,556.90)

Income Tax Expense 35,601,542.91 41,511,191.45 (5,909,648.53)

Net Income 238,826,614 338,591,522 (99,764,908)

627
 Technological Institute of the Philippines

Table 15.30. Projected Income Statement for December 31, 2024-2025

HydroFluor Philippines
Income Statement
2024 2025 Variance
Revenue
Net Sales 1,139,621,883.19 1,253,584,071.51 (113,962,188.32)
Cost of Goods Sold 309,398,054.28 325,866,101.24 (16,468,046.96)
Gross Profit 830,223,828.91 927,717,970.28 (97,494,141.36)
Operating Expenses
Advertising Expenses 31,829,887.67 33,008,772.40 (1,178,884.73)

Process Aids and Packaging 111,914,152.07 115,819,311.78 (3,905,159.71)

Research and Development 50,102,600.96 53,049,812.78 (2,947,211.82)

Loan 108,563,991.10 108,563,991.10 -
Depreciation Expence 148,886,398.40 170,155,883.89 (21,269,485.49)
Other (1,175,915.10) (16,896,179.40) 15,720,264.30

Total Operating Expenses 450,121,115.10 463,701,592.55 (13,580,477.45)

Income From Operations 380,102,713.82 464,016,377.73 (83,913,663.91)

Income Tax Expense 41,511,191.45 46,385,898.51 (4,874,707.07)

Net Income 338,591,522 417,630,479 (79,038,957)

628
 Technological Institute of the Philippines

Table 15.31. Projected Income Statement for December 31, 2025-2026

HydroFluor Philippines
Income Statement
2025 2026 Variance
Revenue
Net Sales 1,253,584,071.51 1,411,774,442.44 (158,190,370.93)
Cost of Goods Sold 325,866,101.24 329,371,364.67 (3,505,263.43)
Gross Profit 927,717,970.28 1,082,403,077.78 (154,685,107.50)
Operating Expenses
Advertising Expenses 33,008,772.40 37,295,625.95 (4,286,853.56)

Process Aids and Packaging 115,819,311.78 119,646,171.41 (3,826,859.62)

Research and Development 53,049,812.78 60,766,149.18 (7,716,336.40)

Loan 108,563,991.10 108,563,991.10 -
Depreciation Expence 170,155,883.89 29,767,355.14 140,388,528.74
Other (16,896,179.40) (31,662,833.41) 14,766,654.02

Total Operating Expenses 463,701,592.55 324,376,459.38 139,325,133.17

Income From Operations 464,016,377.73 758,026,618.40 (294,010,240.67)

Income Tax Expense 46,385,898.51 54,120,153.89 (7,734,255.38)

Net Income 417,630,479 703,906,465 (286,275,985)

629
 Technological Institute of the Philippines

BALANCE SHEET

Table 15.32. Projected Balance Sheet for December 31, 2017

HydroFluor Philippines
Balance Sheet: December 31, 2017

ASSETS 805,467,369.79 LIABILITIES 805,467,369.79

Current Assets 107,567,878.16 Current Liabilities 0.00

Cash in Bank 107,567,878.16 Accounts Payable 0.00
Accounts Receivable 0.00 Tax Payable 0.00

Non-Current Assets 697,899,491.63 Long-term Liabilities 600,000,000.00

Machinery and Equipment 219,362,596.93 Bank Loans Payable 600,000,000.00
Furniture and Fixtures 246,700,376.04
Land and Buildings 178,678,097.92 Shareholder's Equity 205,467,369.79
Other Fixed Assets 49,793,963.72 Capital Stock 300,000,000.00
Accumulated Depreciation 3,364,457.01 Retained Earnings -94,532,630.21

630
 Technological Institute of the Philippines

Table 15.33. Projected Balance Sheet for December 31, 2018

HydroFluor Philippines
Balance Sheet: December 31, 2018

ASSETS 1,114,469,617.64 LIABILITIES 1,114,469,617.64

Current Assets 470,806,268.10 Current Liabilities 9,758,826.11

Cash in Bank 215,426,228.10 Accounts Payable 9,758,826.11
Accounts Receivable 255,380,040.00 Tax Payable 0.00

Non-Current Assets 643,663,349.53 Long-term Liabilities 636,000,000.00

Machinery and Equipment 147,221,426.36 Bank Loans Payable 636,000,000.00
Furniture and Fixtures 246,700,376.04
Land and Buildings 178,678,097.92 Shareholder's Equity 468,710,791.52
Other Fixed Assets 49,793,963.72 Capital Stock 300,000,000.00
Accumulated Depreciation 21,269,485.49 Retained Earnings 168,710,791.52

631
 Technological Institute of the Philippines

Table 15.34. Projected Balance Sheet for December 31, 2019

HydroFluor Philippines
Balance Sheet: December 31, 2019

ASSETS 1,800,179,624.02 LIABILITIES 1,800,179,624.02

Current Assets 1,207,387,959.56 Current Liabilities 12,523,896.72

Cash in Bank 635,975,120.06 Accounts Payable 12,523,896.72
Accounts Receivable 571,412,839.50 Tax Payable 0.00

Non-Current Assets 592,791,664.45 Long-term Liabilities 674,160,000.00

Machinery and Equipment 75,080,255.79 Bank Loans Payable 674,160,000.00
Furniture and Fixtures 246,700,376.04
Land and Buildings 178,678,097.92 Shareholder's Equity 1,113,495,727.29
Other Fixed Assets 49,793,963.72 Capital Stock 300,000,000.00
Accumulated Depreciation 42,538,970.97 Retained Earnings 813,495,727.29

632
 Technological Institute of the Philippines

Table 15.35. Projected Balance Sheet for December 31, 2020

HydroFluor Philippines
Balance Sheet:December 31, 2020

ASSETS 2,250,213,551.19 LIABILITIES 2,250,213,551.19

Current Assets 1,708,293,571.82 Current Liabilities 12,576,368.26

Cash in Bank 1,027,457,479.07 Accounts Payable 12,576,368.26
Accounts Receivable 680,836,092.75 Tax Payable 0.00

Non-Current Assets 541,919,979.37 Long-term Liabilities 606,045,608.90

Machinery and Equipment 2,939,085.22 Bank Loans Payable 606,045,608.90
Furniture and Fixtures 246,700,376.04
Land and Buildings 178,678,097.92 Shareholder's Equity 1,631,591,574.03
Other Fixed Assets 49,793,963.72 Capital Stock 300,000,000.00
Accumulated Depreciation 63,808,456.46 Retained Earnings 1,331,591,574.03

633
 Technological Institute of the Philippines

Table 15.36. Projected Balance Sheet for December 31, 2021

HydroFluor Philippines
Balance Sheet: December 31, 2021

ASSETS 2,894,269,311.58 LIABILITIES 2,894,269,311.58

Current Assets 2,264,816,846.61 Current Liabilities 14,072,271.52

Cash in Bank 1,475,125,011.81 Accounts Payable 14,072,271.52
Accounts Receivable 789,691,834.80 Tax Payable 0.00

Non-Current Assets 629,452,464.98 Long-term Liabilities 533,844,354.33

Machinery and Equipment 69,202,085.35 Bank Loans Payable 533,844,354.33
Furniture and Fixtures 246,700,376.04
Land and Buildings 178,678,097.92 Shareholder's Equity 2,346,352,685.74
Other Fixed Assets 49,793,963.72 Capital Stock 300,000,000.00
Accumulated Depreciation 85,077,941.94 Retained Earnings 2,046,352,685.74

634
 Technological Institute of the Philippines

Table 15.37. Projected Balance Sheet for December 31, 2022

HydroFluor Philippines
Balance Sheet: December 31, 2022

ASSETS 3,216,290,346.06 LIABILITIES 3,216,290,346.06

Current Assets 2,631,831,395.72 Current Liabilities 52,082,694.80

Cash in Bank 1,713,600,047.59 Accounts Payable 18,724,513.79
Accounts Receivable 918,231,348.13 Tax Payable 33,358,181.00

Non-Current Assets 584,458,950.34 Long-term Liabilities 457,311,024.49

Machinery and Equipment 2,939,085.22 Bank Loans Payable 457,311,024.49
Furniture and Fixtures 246,700,376.04
Land and Buildings 178,678,097.92 Shareholder's Equity 2,706,896,626.77
Other Fixed Assets 49,793,963.72 Capital Stock 300,000,000.00
Accumulated Depreciation 106,347,427.43 Retained Earnings 2,406,896,626.77

635
 Technological Institute of the Philippines

Table 15.38. Projected Balance Sheet for December 31, 2023

HydroFluor Philippines
Balance Sheet: December 31, 2023

ASSETS 3,635,786,385.78 LIABILITIES 3,635,786,385.78

Current Assets 2,963,794,949.83 Current Liabilities 84,606,035.61

Cash in Bank 1,927,775,056.02 Accounts Payable 49,004,492.70
Accounts Receivable 1,036,019,893.81 Tax Payable 35,601,542.91

Non-Current Assets 671,991,435.95 Long-term Liabilities 376,185,694.86

Machinery and Equipment 69,202,085.35 Bank Loans Payable 376,185,694.86
Furniture and Fixtures 246,700,376.04
Land and Buildings 178,678,097.92 Shareholder's Equity 3,174,994,655.31
Other Fixed Assets 49,793,963.72 Capital Stock 300,000,000.00
Accumulated Depreciation 127,616,912.92 Retained Earnings 2,874,994,655.31

636
 Technological Institute of the Philippines

Table 15.39. Projected Balance Sheet for December 31, 2024

HydroFluor Philippines
Balance Sheet: December 31, 2024

ASSETS 4,004,352,652.87 LIABILITIES 4,004,352,652.87

Current Assets 3,377,354,731.56 Current Liabilities 97,647,539.89

Cash in Bank 2,237,732,848.36 Accounts Payable 56,136,348.44
Accounts Receivable 1,139,621,883.19 Tax Payable 41,511,191.45

Non-Current Assets 626,997,921.31 Long-term Liabilities 290,192,845.45

Machinery and Equipment 2,939,085.22 Bank Loans Payable 290,192,845.45
Furniture and Fixtures 246,700,376.04
Land and Buildings 178,678,097.92 Shareholder's Equity 3,616,512,267.53
Other Fixed Assets 49,793,963.72 Capital Stock 300,000,000.00
Accumulated Depreciation 148,886,398.40 Retained Earnings 3,316,512,267.53

637
 Technological Institute of the Philippines

Table 15.40. Projected Balance Sheet for December 31, 2025

HydroFluor Philippines
Balance Sheet: December 31, 2025

ASSETS 4,594,338,335.38 LIABILITIES 4,594,338,335.38

Current Assets 3,879,807,928.45 Current Liabilities 102,380,791.30

Cash in Bank 2,626,223,856.94 Accounts Payable 55,994,892.79
Accounts Receivable 1,253,584,071.51 Tax Payable 46,385,898.51

Non-Current Assets 714,530,406.92 Long-term Liabilities 199,040,425.08

Machinery and Equipment 69,202,085.35 Bank Loans Payable 199,040,425.08
Furniture and Fixtures 246,700,376.04
Land and Buildings 178,678,097.92 Shareholder's Equity 4,292,917,118.99
Other Fixed Assets 49,793,963.72 Capital Stock 300,000,000.00
Accumulated Depreciation 170,155,883.89 Retained Earnings 3,992,917,118.99

638
 Technological Institute of the Philippines

Table 15.41. Projected Balance Sheet for December 31, 2026

HydroFluor Philippines
Balance Sheet:December 31, 2026

ASSETS 5,236,092,941.46 LIABILITIES 5,236,092,941.46

Current Assets 4,566,556,049.18 Current Liabilities 81,621,115.56

Cash in Bank 3,154,781,606.74 Accounts Payable 58,691,327.26
Accounts Receivable 1,411,774,442.44 Tax Payable 22,929,788.30

Non-Current Assets 669,536,892.28 Long-term Liabilities 102,418,859

Machinery and Equipment 2,939,085.22 Bank Loans Payable 102,418,859
Furniture and Fixtures 246,700,376.04
Land and Buildings 178,678,097.92 Shareholder's Equity 5,052,052,966.42
Other Fixed Assets 49,793,963.72 Capital Stock 300,000,000.00
Accumulated Depreciation 191,425,369.38 Retained Earnings 4,752,052,966.42

639
 Technological Institute of the Philippines

PROFITABILITY TEST, PAYBACK PERIOD AND BREAK EVEN ANALYSIS

PAYBACK PERIOD
The payback period is the length of time until the sum of an investments cash flows
equals its cost.
Total Capital Investment = 608,872,224.06

Table 15.42 Cash Flows Ending Balance

Year Cost
2017 107,567,878.16
2018 215,426,228.10
2019 635,975,120.06
2020 1,027,457,479.07
2021 1,475,125,011.81
2022 1,713,600,047.59
2023 1,927,775,056.02
2024 2,237,732,848.36
2025 2,626,223,856.94
2026 3,154,781,606.74

The payback period for the business was computed to be on a span of 3 years.

640
 Technological Institute of the Philippines

PROFITABILITY TEST

1. Return of Investment on Asset

A performance measure used to evaluate the efficiency of an investment or to compare
the efficiency of a number of different investments. (Hilton et. al, 2008)

Return on Investment (ROI) = (Net Profit Asset)x100

Table 15.43. Return of Investment on Asset

Year Net Profit Average Assets % ROI
2017 (86,481,414) 805,467,369.79 -5.20
2018 114,158,268 1,114,469,617.64 4.12
2019 431,870,099 1,800,179,624.02 7.48
2020 417,087,211 2,250,213,551.19 14.37
2021 472,424,735 2,894,269,311.58 21.16
2022 206,555,010 3,216,290,346.06 10.01
2023 238,826,614 3,635,786,385.78 11.94
2024 338,591,522 4,004,352,652.87 13.64
2025 417,630,479 4,594,338,335.38 15.17
2026 703,906,465 5,236,092,941.46 13.86

40.00

20.00
% ROI

0.00
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
-20.00

-40.00
YEAR

Return of Investment on Asset

Figure 15.1 Graph of Return of Investment on Asset
Figure 15.1 illustrates the graph of ROI vs. year. The percent ROI is increasing
from year 2017-2022. Then sudden decrease at year 2023. This is because of the deduction
of 30% corporate tax at the sixth year of operation. Income tax expense is free at the first
five years of operation.

641
 Technological Institute of the Philippines

2. Rate of Return Based on Discounted Cash Flow

The method of approach for a profitability evaluation by discounted cash
flow takes into account the time value of money and is based on the amount of the
investment that is unreturned at the end of each year during the estimated life of
the project (Peters & Timmerhaus, 1991).

=
( + )

dn = discount factor
i = interest rate of return
N = year of project life to which cash flow applies

Table 15.44 Summary of Rate of Return Based on Discounted Cash Flow

TCI 608,872,224.06 0.7454
Year Ending Cash Balance Discount Factor
2017 107,567,878.16 0.572934571 61,629,356.11
2018 215,426,228.10 0.328254023 70,714,525.93
2019 635,975,120.06 0.188068078 119,606,618.18
2020 1,027,457,479.07 0.107750703 110,709,265.97
2021 1,475,125,011.81 0.061734103 91,065,519.34
2022 1,713,600,047.59 0.035369602 60,609,351.30
2023 1,927,775,056.02 0.020264468 39,065,335.20
2024 2,237,732,848.36 0.011610214 25,980,557.38
2025 2,626,223,856.94 0.006651893 17,469,360.12
2026 3,154,781,606.74 0.003811099 12,023,186.50
Total Present Value 608,873,076.02
After series of trial, the rate of return based on the discounted cash flow is 74.54%

3. Capitalized Cost
The capitalized-cost profitability concept is useful for comparing
alternatives which exists as possible investment choices within a single overall
project. Capitalized cost related to investment represents the amount of money that
must be available initially to purchase the equipment and simultaneously provide

642
 Technological Institute of the Philippines

sufficient funds for interest accumulation to permit perpetual replacement of the

equipment (Peters & Timmerhaus,1991).

The basic equation for capitalized cost is given by:

= +
( + )

K= capitalized Cost
CV= Original Cost of Equipment = Purchased Equipment
CR= Replacement Cost= CV
N= estimated useful life of equipment = 12
i= interest rate = 15%

, , .
= , , . +
( + . )
= , , .

Comparing to Minimum Acceptable Rate of Return (MARR)

The MARR, or hurdle rate is the minimum rate of return on a project a manager or
company is willing to accept before starting a project, given its risk and the opportunity
cost of forgoing other projects. It functions as a parameter for comparison when
determining the worthiness of a particular investment compared to the associated risk.
MARR is set to be 10%. The projected values of ROI of HydroFluor Philippines
on its payback period is greater than the MARR therefore, the project may proceed.

643
 Technological Institute of the Philippines

BREAK EVEN ANALYSIS

It calculates the break-even point based on fixed costs, variable costs per unit of
sales and revenue per unit of sales (Hilton et. al, 2008). Break-even point is the time when
the total revenue of a company equals of that of the total cost.

Figure 15.2 Graph of Break Even Analysis of Hydrogen Fluoride at Current Price

644
 Technological Institute of the Philippines

Table 15.45. Summary of Break Even Analysis of Hydrogen Fluoride at Current

Price

Number of Sales
0 570 1,140 1,710 2,279
Business
0 154,215,000 308,430,000 462,645,000 616,860,000
Revenue
Unit Sales Price
270,619 270,619 270,619 270,619 270,619
Variable Costs
0 103,119,498 206,238,995 309,358,493 412,477,990
Variable Cost %
67% 67% 67% 67% 67%
Variable Costs
180,956 180,956 180,956 180,956 180,956
per Unit
Fixed Costs
100,037,920 100,037,920 100,037,920 100,037,920 100,037,920
Total Costs
100,037,920 203,157,417 306,276,915 409,396,412 512,515,910
Operating
-100,037,920 -48,942,417 2,153,085 53,248,588 104,344,090
Surplus
Surplus %
N/A -31.7% 0.7% 11.5% 16.9%
Breakeven Point
301,931,620 301,931,620 301,931,620 301,931,620 301,931,620
Revenue
Breakeven Point
1,116 1,116 1,116 1,116 1,116
Number of Sales
Note: Per unit of Hydrogen Fluoride has a volume of 300 gallons. Number of units
shown in Table 15.45. is rounded up to the nearest whole number.

Figure 15.2 shows the Break-even point at current price. The current price of
Hydrogen Fluoride per kilogram is Php 250 which is equivalent to Php 902.06 per gallon.
The break-even point is the intersection of the total sales and the companys total revenue.
Table 15.45. shows the summary of the break even analysis at current price. Per unit of
Hydrogen Fluoride has a volume of 300 gallons. The number of units shown in Table
15.45. is rounded up to the nearest whole number. The break even point at current price is
1,116 units or 334,800 gallons per annum.

645
 Technological Institute of the Philippines

Figure 15.3 Graph of Break Even Analysis of Hydrogen Fluoride at Increased Price

646
 Technological Institute of the Philippines

Table 15.46. Summary of Break Even Analysis of Hydrogen Fluoride at Increased

Price

Number of Sales 0 456 912 1,368 1,824

Business Revenue 0 135,709,200 271,418,400 407,127,600 542,836,800
Unit Sales Price 297,681 297,681 297,681 297,681 297,681
Variable Costs 0 82,495,598 164,991,196 247,486,794 329,982,392
Variable Cost % 61% 61% 61% 61% 61%
Variable Costs per 180,956 180,956 180,956 180,956 180,956
Unit
Fixed Costs 100,037,920 100,037,920 100,037,920 100,037,920 100,037,920
Total Costs 100,037,920 182,533,518 265,029,116 347,524,714 430,020,312
Operating Surplus -100,037,920 -46,824,318 6,389,284 59,602,886 112,816,488
Surplus % N/A -34.5% 2.4% 14.6% 20.8%
Breakeven Point 255,123,983 255,123,983 255,123,983 255,123,983 255,123,983
Revenue
Breakeven Point 857 857 857 857 857
Number of Sales

Figure 15.3 and Table 15.46 show the breakeven analysis for the increased price of
Carbon Black with Php 255,123,983 breakeven point revenue. The number of sales needed
by the company to reach the breakeven point is 857. Increased price breakeven analysis
shows another option for the company to know the minimum amount of sales needed to
breakeven using an increased price for the product.

Using the increased price, there will be a 23.21% decrease in the number of sales
compared to the current price of Hydrogen Fluoride. However, though increasing the
product price may shorten the time for achieving breakeven, it may affect the marketability
of the product especially in the local market.

647
 Technological Institute of the Philippines

Figure 15.4 Graph of Break Even Analysis of Hydrogen Fluoride at Decreased Price

648
 Technological Institute of the Philippines

Table 15.47. Summary of Break Even Analysis of Hydrogen Fluoride at Decreased

Price

Number of Sales 0 684 1,368 2,051 2,735

Business Revenue 0 166,552,200 333,104,400 499,656,600 666,208,800
Unit Sales Price 243,557 243,557 243,557 243,557 243,557
Variable Costs 0 123,743,397 247,486,794 371,230,191 494,973,588
Variable Cost % 74% 74% 74% 74% 74%
Variable Costs per 180,956 180,956 180,956 180,956 180,956
Unit
Fixed Costs 100,037,920 100,037,920 100,037,920 100,037,920 100,037,920
Total Costs 100,037,920 223,781,317 347,524,714 471,268,111 595,011,508
Operating Surplus -100,037,920 -57,229,117 -14,420,314 28,388,489 71,197,292
Surplus % N/A -34.4% -4.3% 5.7% 10.7%
Breakeven Point 389,208,165 389,208,165 389,208,165 389,208,165 389,208,165
Revenue
Breakeven Point 1,598 1,598 1,598 1,598 1,598
Number of Sales

Figure 15.4 and Table 15.47 show the breakeven analysis for the decreased price
of Hydrogen Fluoride with Php 389,208,165 breakeven point revenue. The number of sales
needed by the company to reach the breakeven point is 1,598. Decreased price breakeven
analysis shows another option for the company to know the minimum amount of sales
needed to breakeven using a decreased price for the product.

Using the decreased price, there will be an 30.16% increase in the number of sales
needed to be sold to achieve breakeven compared to the current price of Hydrogen
Fluoride. Decreased price of the product may increase the marketability of Hydrogen
Fluoride however it may prolong the company in achieving its breakeven point.

649
 Technological Institute of the Philippines

Figure 15.5 Graph of Break Even Analysis of Hydrogen Fluoride at Optimum Price

650
 Technological Institute of the Philippines

Table 15.48. Summary of Break Even Analysis of Hydrogen Fluoride at Optimum

Price

Number of 0 479 957 1,436 1,915

Sales
Business 0 139,903,848 279,807,696 419,711,544 559,615,392
Revenue
Unit Sales Price 292,268 292,268 292,268 292,268 292,268
Variable Costs 0 86,620,378 173,240,756 259,861,134 346,481,512
Variable Cost % 62% 62% 62% 62% 62%
Variable Costs 180,956 180,956 180,956 180,956 180,956
per Unit
Fixed Costs 100,037,920 100,037,920 100,037,920 100,037,920 100,037,920
Total Costs 100,037,920 186,658,298 273,278,676 359,899,054 446,519,432
Operating -100,037,920 -46,754,450 6,529,020 59,812,490 113,095,960
Surplus
Surplus % N/A -33.4% 2.3% 14.3% 20.2%
Breakeven 262,664,761 262,664,761 262,664,761 262,664,761 262,664,761
Point Revenue
Breakeven 899 899 899 899 899
Point Number
of Sales

Figure 15.5 and Table 15.48 show the breakeven analysis for the optimum price of
Hydrogen Fluoride with Php 262,664,761 breakeven point revenue. The number of sales
needed by the company to reach the breakeven point is 899. Optimum price breakeven
analysis shows the best option for the company to know the minimum amount of sales
needed to breakeven using optimum parameters. Parameters such as price of the product,
operating surplus and number of sales as well as the fixed cost and the variable cost
determine the optimum point of breakeven revenue and sales for the company thus
optimizing its profit and ensuring good marketability for HydroFluor Philippines.

651