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Finanical Analysis For Generic Company

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Analysis of InvestmentвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦..3


Financial StatementsвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦...5

Cash Flow Forecast…................вЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦.......5

Profit and Loss Statement...вЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦..6

Balance Sheet…...вЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦.7

Calculating Return from InvestmentвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦......8


Acceptability of Return from InvestmentвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦...10

Alternative Uses of Our Invested Money..вЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦.11

Final StatementвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦12



вЂ?Envirotech Ltd. Is a company that manufactures domestic appliances usingвЂ¦Ð²Ð‚?environmentally friendly’ technology’ (Major Project Autumn 2006). It currently produces a technology called Mark I for which it receives a licence fee and royalties from an investing company, Otori. It has entered an agreement as of 1 July 2004 with Otori to help develop a new technology Mark II, which details the payment of monthly development fee over three years and a decision at 31 December 2007 either to:

- Scenario 1: Purchase the company and rights to the technology from Envirotech

- Scenario 2: Continue paying a licence fee plus royalties for the use of the technology

- Scenario 3: Discontinue the relationship insofar as the Mark II technology, but continue paying the licence fee and royalties for Mark I

The aim of this financial document is to analyse whether it is worthwhile investing a minimum of $50 000 in Envirotech, based on the fact that �no profits are to be distributed prior to June 2009’.

Assuming the equally likely probability of the above three scenarios, it has been concluded from this analysis that the investment is worthwhile. Financial statements and calculations for each scenario have been provided as well as alternative uses of the money to be invested.

Analysis of Investment

• Assumptions

These were the following assumptions that were drawn from the information provided of the company Envirotech:

- Licence fee of $200 000 for Mark I will remain the same for Envirotech when Mark II comes into effect.

- �Otori suggest that the royalty payments to Envirotech will continue to rise by about $50 000 per year for the next five years.’

This will start for Mark I in the next financial year 2004/5 and end in 2008/9.

- �Pay Envirotech $50 000 per month for the next three years to help in the development of the Mark II version, commencing July 1st, 2004.’

Development fee commences financial year 2004/5 and ends 2006/7.

- �the Mark II version of this technology will start attracting royalties by mid 2006.’

This is in the case of scenario 1 and 2, where the �Mark II version has reached production stage before 31 Dec 2007’ (pg 1). �Steady state profitability will have been reached in 2006’ (pg 3). Royalties will start being earned by 1 January 2006 (i.e. second half of financial period 2005/06).

- �Envirotech suggest that in the first year of receipt, Mark II royalties will be similar to those paid for the Mark I version, but will ramp up to ten times that amount in two to three years, before levelling off.’

This was taken to refer to the Mark



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