AE Business EAE School We make

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Executive MBA
Student name: Jorge Vilà Riera
Module 3 – Corporate Finance
Financial Planning of Motores ABC, SA 03/08/2022

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EAE Business We make
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0. Index
Executive MBA..............................................................................................................................................................................................................................................................................1
0. Index........................................................................................................................................................................................................................................................................................2
Business We make...............................................................................................................................................................................................................................................................3
School I it happen...................................................................................................................................................................................................................................................................3
0. Current situation and inputs....................................................................................................................................................................................................................................................3
Profit and loss..........................................................................................................................................................................................................................................................................3
Balance sheet...........................................................................................................................................................................................................................................................................3
Inputs Investment inputs......................................................................................................................................................................................................................................................3
1. WACC.....................................................................................................................................................................................................................................................................................3
2. Investment viability.................................................................................................................................................................................................................................................................5
IRR > WACC ✓.................................................................................................................................................................................................................................................................5
3. Profit and Loss, Balance Sheet and Financial Needs..............................................................................................................................................................................................................5
Balance sheet.......................................................................................................................................................................................................................................................................5
Debt amortization table........................................................................................................................................................................................................................................................5
4. Proposed dashboard review.................................................................................................................................................................................................................................................6
d. Financial.........................................................................................................................................................................................................................................................................6
5. Dashboard proposal.............................................................................................................................................................................................................................................................6
1.
 Business We make
School I it happen

0. Current situation and inputs

Profit and loss Balance sheet Inputs Investment inputs

Thousands of € Year 1 Thousands of € Year 1
Sales 2.000 Executive MBA 1
OPEX (1.800)
0. Index 2
EBIT 200
Interest (40)
Business We make 3
EBT 160 School I it happen 3
ES (64)
EAT 96
• We assume that the dividend is paid within the fiscal year, therefore at the end of the
Dividends 64 year the dividend to be paid has already been accounted for, reducing the PN
EAT to reserves 32
• Interest on external debt is paid based on the debt at the beginning of the year
0. Current situation and inputs 3
Profit and loss 3
Balance sheet 3
Inputs Investment inputs 3
1. WACC 3
2. Investment viability 5
IRR > WACC ✓ 5
3. Profit and Loss, Balance Sheet and Financial Needs 5
Balance sheet 5
Debt amortization table 5

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4. Proposed dashboard review6
d. Financial 6
5. Dashboard proposal 6

Dividends 2/3 EAT

kd 10%
Ke 15%
t (IS) 40%
Ke*(1-t) 9%

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 Sales var 10%
OPEX Var 10%
Var ANC 10%
Var FM 10%
D0 (80.000)
CF 6 years 20.000

1. WACC

Debt Heritage
WACC = K d (l - tx) * --------,------------------+ K e * -------,------------------ WACC = 11.4%
Debt 4- Equity Debt + Equity

Taking into account the current balance sheet ratio of PN and external debt we see that
the company's cost of capital is 11.4%

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2. Investment viability
NPV > 0
Yea Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 * ' " 3
r GO 3.272

✓
CFs (80.000) 20.000 20.000 20.000 20.000 20.000 20.000
IRR > WACC
CF Accum. (80.000) (60.000) (40.000) (20.000) 20.000 40.000

✓
—
Updated CFs (80.000) 17.953 16.116 14.467 12.986 11.657 10.465
IRR 13,0%
CF Act Cum. (80.000) (62.047) (45.931) (31.464) (18.477) (6.820) 3.645
- -~ We conclude that the investment is
Simple payback 4,00
viable given that the NPV > 0 and the
IRR > WACC . It will be recovered in the
Composite Payback 5,65 next 4 years based on the simple
OR payback criterion and in 5.65 years
based on the compound payback
criterion.
3. Profit and Loss, Balance Sheet and Financial Needs
In order to minimize the impact of debt repayment, we will balance it
Profit and loss Balance sheet
with the cash flows generated by the investment.
Thousands of € Year 1 Year 2 Thousands of € Year 1 Year 2
Sales 2.000 2.200 ANC 800 880 We have assumed that the interest continues to be 10% on the
OPEX (1.800) (1.980) Maneuver fund 200 220 capital to be returned at the beginning
EBIT 200 220 Total assets 1.000 1.100 of the year.
Interest (40) (40) P.N. 600 636 Debt amortization table
EBT 160 180 LP Debt 400 400 Amortizatio Final
Figures in € Nominal start Payments Interests
ES (64) (72) Total PN and P 1.000 1.036 n capital rating
EAT 96 108 Nec.Financ. - (64) Year 2 - - - - 80.000,0
Dividends 64 72 Year 3 80.000,0 20.000,0 12.000,0 8.000,0 68.000,0
EAT to reserves 32 36 Year 4 68.000,0 20.000,0 13.200,0 6.800,0 54.800,0
Year 5 54.800,0 20.000,0 14.520,0 5.480,0 40.280,0
The financing needs are 64 thousand euros. Year 6 40.280,0 20.000,0 15.972,0 4.028,0 24.308,0
Year 7 24.308,0 20.000,0 17.569,2 2.430,8 6.738,8
Given that Kd(1-t) < Ke we would recommend financing it with external Year 8 6.738,8 7.412,7 6.738,8 673,9 -
debt Total 107.412,7 80.000,0 27.412,7

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4. Proposed dashboard review
T
Company vision: To be the best manufacturer and reference in terms of innovation
O
continuation of its productive processes
\ J

d. Financial d. Internal processes • The new product development indicator is not

• Although ROE is a good indicator, some indicators • Development of new adequate, given that the objective of the investment
are missing • Return for •>
shareholders products • The investment in R&D is correct but in our case we
• Investment in R&D would add some indicators

d. Customers
• The indicator of increase in references sold is not d. Form. and growth
the most appropriate given the investment objective. • Increase the number of
references sold • Employee turnover •> • The proposed indicators are correct
• Yes, we would maintain customer satisfaction. • Productivity improvement
• Customer satisfaction

5. Dashboard proposal
Dimension Name Purpose How do we measure it Responsible Frequency
Shareholder profitability Increase profitability ROE Annual CFO
Increase in sales Increase income Sales var compared to previous year Monthly Controller
Financial
Improve EBITDA Increase operating profit EBITDA/Sales Quarterly CFO
Maintenance costs Verify the profitability of the investment Difference between expected and actual costs Annual CFO
Increase in customers Increase and diversify the client portfolio New clients and lost clients Annual CFO
Customers
Customer satisfaction Increase customer loyalty and satisfaction Satisfaction surveys Annual HR
Reduce manufacturing cycles Increase productivity Variation in final units produced Monthly controller
Internal processes Measure environmental impact Control of the environmental impact of the new line Waste evaluation Quarterly Dir. Factory
Investment in R&D Innovation of production processes Improvements in recent years Annual Dir. R&D
Employee turnover Retention of intellectual capital Average seniority of employees Annual HR
Training and growth
Continuous training Productivity improvement Factory: time spent on specific tasks Quarterly HR

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