Aqua monta – FINANCIAL PLAN – PART 4

According to the current perception of the realization of water bottling plant investment, the project would be funded in the following way:

• Financial resources required for carrying out research work, preparation of technical documentation – designing, building and construction of pipeline the investor will provide from its own resources;
• Financial resources required for the procurement of equipment for the factory for bottling of water will be provided using a credit with the following conditions: credit repayment period of 10 (ten) years, the interest rate of 5% on annual level, the grace period of 2 (two) years and 1% bank commission .

The following review is shown based on interim interest rate, bank fees and loans repay plan. Cost depreciation is made by applying the rate prescribed by law. Depreciation free funds, are used to repay the loan in the credit period. After a period of five years of exploitation, the costs of depreciation are reduced by the costs of depreciation of interim interest and other investments (cost of the research, design, supervision and cost of the investors). The greatest amount of depreciation costs arises from the depreciation of technological equipment, because the investment in technological equipment is significant.

FINANCIAL PROJECTIONS

Calculated on the basis of annual costs and financial revenue, projections are made of production costs, as well as the income statement and cash flow of inflows and outflows. The analysis refers to the period from 2010 to 2021 years.

The table provided in the Appendix shows the structure of bottled water production and selling price, in the means of defined terms of project implementation financing. Calculations show that the average selling price of water should be formed on the level above 0.15 EUR/l.

Income statement shows the distribution of income and profitability of business by some years. Projection shows that the bottling water business would be profitable, if the income from the sale of water would be formed at the adopted level of sales price of 0.25 EUR/1.5 l and 0.20 EUR/0.50 l.

Cash flow of financial inflows and outflows of funds shows the liquidity of operations, and the ability to cover all of the due financial obligations with the inflow. This review covers the period of construction and the period of exploitation. Calculation shows that if the income from the sales of bottled water will be formed at the level of the adopted sales price (EUR 0.25/1.5 l and 0.20 EUR/0.5 l) debt coverage ratio would be above 1 throughout the repayment period.

CASH-FLOW PROJECTIONS

See Appendix.

PROFITABILITY ANALYSIS

On the basis of the estimated flow of income and expenses, the following profitability indicators are calculated:

– internal rate of return,

– net present value of the project,

– relation of income and expenses,

– the period of return on investment and

– long-term average price of 1 l of bottled water.

The project for water bottling achieves profitability rate marginally significantly greater than the required rate of 10%. Net present value of the project, throughout the period of construction and exploitation and the discount rate of 10%, is approximately EUR 35 million, which points to the outstanding performance of the implementation of this project.

Indicator of the total revenues and expenses in the amount of 1.47, also points to the profitability and attractiveness of the investment in the implementation of the bottling water factory project.

Total funds invested in the project implementation, under the realization of the bottled water by sales prices of EUR 0.25/1.5 l and 0.20 EUR/0.5 l and discount rate of 10%, would be returned back in the second year of exploitation. The average long-term price of the bottled water in the period of 20 years and the accumulation rate of 10% is 0.154 EUR/l.

CONCLUSION

Aqua Monta is a perfect investment opportunity for any foreign investor seeking to become involved in the spring water bottling business. It offers advantageous compensation and favorable return on investment.

Ropušica spring is located at the altitude of 1,365 m, in utterly inhabited area. Minimal spring outflow is greater than 0.5 l/s. Technical solution for spring water bottling process proposed by this business plan involves the construction of water collection vault, pipelines for the transport of water and a plant for water bottling with relevant and adequate equipment. The capacity of the factory for water bottling is 8000 bottles of 1.5 l and 8000 bottles of 0.5 l, or 64,000,000 l/annually. It is planned to build up this facility in a period of 8 months.

Value of investments for the realization of this project is 4.1 million EUR. The total value of construction works participate with 18.2%, equipment 73%, funding costs 6.4% and permanent working capital 2.4%. Necessary financial resources will be provided by loans or foreign investors and from own funds. The existing owner has a financing need of 2,000,000 EUR that would cover the investment in the spring water bottling equipment.

The average long-term price of the bottled water in the period of 20 years and the accumulation rate of 10% is 0.154 EUR/I. Planned sales price of the bottled water is 0.25 EUR/1.5 l and 0.20 EUR/0.50 l. Total funds invested in the project implementation would be returned in the second year of exploitation, if the water is sold for the proposed bottled water prices.