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Mexico Operating Costs Analysis | PDF | Book Value | Net Present Value
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Mexico Operating Costs Analysis

The document presents projected operating costs and cash flow projections for a manufacturing company in Mexico considering a switch from a manual to an automatic equipment process. Key details include: - Projected operating costs are provided from 2008-2015 for the manual and new automatic equipment processes - Cash flow projections factor in cost savings, taxes, asset purchases and sales, depreciation, and loan details for the new equipment - Net present value calculations are provided in Mexican pesos and converted to euros using exchange rates and inflation assumptions over the period

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Paco Colín
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6K views9 pages

Mexico Operating Costs Analysis

The document presents projected operating costs and cash flow projections for a manufacturing company in Mexico considering a switch from a manual to an automatic equipment process. Key details include: - Projected operating costs are provided from 2008-2015 for the manual and new automatic equipment processes - Cash flow projections factor in cost savings, taxes, asset purchases and sales, depreciation, and loan details for the new equipment - Net present value calculations are provided in Mexican pesos and converted to euros using exchange rates and inflation assumptions over the period

Uploaded by

Paco Colín
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Inflatio Mexico 7%

Tax rate 35%

2008 2009
Projected Operating Costs, Manual Process
Unit volume (000s) 496
Materials 564,816
Direct Labor 1,115,184
Overhead 1,680,000
Total 3,360,000
Materials/unit 1.1387
Direct labor/unit 2.2484

Projected Operating Costs, New Automatic Equipment


Unit volume (000s) 496
Materials 542,223
Direct Labor 524,136
Overhead 1,566,211
Total 2,632,570
Materials/unit 1.0932
Direct labor/ unit 1.0567

Cash Flow (MXN)


(+) Cost Savings 727,430
(-) Tax on savings 254,601
(+) Sell old machine 175,000
Book Value old mach 250,000
Booked loss on asset sale 75,000
(+) Tax shield from write of 26,250
(-) Purchase new mach 3,500,000
Depreciation 350,000
(+) Tax shield from dep. 122,500
(-) Service of loan 550,422
Balance 3,500,000 3,271,928
To principal 228,072
Interest (9.21%) 322,350
(+) Tax Shiel interest 112,823
(+) Savage value
Total Cash flow (3,298,750) 157,730
NPV @ Pesos @8% (532,801)
Convert in Euros @15.99MXN/E (33,321)
2010 2011 2012 2013 2014 2015

546 600 660 660 660 660


664,788 782,456 920,951 985,417 1,054,396 1,128,204
1,312,572 1,544,897 1,818,343 1,945,627 2,081,821 2,227,549
1,797,600 1,923,432 2,058,072 2,202,137 2,356,287 2,521,227
3,774,960 4,250,785 4,797,366 5,133,181 5,492,504 5,876,980
1.2185 1.3037 1.395 1.4927 1.5971 1.7089
2.4057 2.5741 2.7543 2.9471 3.1534 3.3742

546 600 660 660 660 660


638,197 751,158 884,113 946,001 1,012,221 1,083,076
616,909 726,101 854,621 914,445 978,456 1,046,948
1,675,846 1,793,155 1,918,676 2,052,983 2,196,692 2,350,460
2,930,952 3,270,414 3,657,410 3,913,429 4,187,369 4,480,484
1.1697 1.2516 1.3392 1.433 1.5333 1.6406
1.1307 1.2098 1.2945 1.3852 1.4821 1.5859

844,008 980,371 1,139,956 1,219,752 1,305,135 1,396,496


295,403 343,130 398,985 426,913 456,797 488,774

350,000 350,000 350,000 350,000 350,000 350,000


122,500 122,500 122,500 122,500 122,500 122,500
550,422 550,422 550,422 550,422 550,422 550,422
3,022,851 2,750,834 2,453,764 2,129,334 1,775,024 1,388,082
249,077 272,017 297,070 324,430 354,310 386,942
301,345 278,405 253,352 225,992 196,112 163,480
105,471 97,442 88,673 79,097 68,639 57,218

226,154 306,761 401,723 444,014 489,055 537,019


2016 2017 2018 CAGR

660 660 660


1,207,178 1,291,681 1,382,099
2,383,477 2,550,321 2,728,843
2,697,713 2,886,553 3,088,611
6,288,368 6,728,555 7,199,553
1.8286 1.9566 2.0935
3.6104 3.8631 4.1335

660 660 660


1,158,891 1,240,014 1,326,815
1,120,234 1,198,651 1,282,556
2,514,993 2,691,042 2,879,415
4,794,118 5,129,707 5,488,786
1.7554 1.8783 2.0098
1.6969 1.8157 1.9427

1,494,250 1,598,848 1,710,767 10.0%


522,988 559,597 598,768

350,000 350,000 350,000


122,500 122,500 122,500
550,422 550,422 550,422
965,502 504,003 0
422,579 461,499 504,003
127,842 88,923 46,419
44,745 31,123 16,247
0
588,086 642,452 700,323
Inflatio Mexico 7%
Tax rate 35%

2008 2009 2010


Projected Operating Costs, Manual Process
Unit volume (000s) 496 546
Materials 564,816 664,788
Direct Labor 1,115,184 1,312,572
Overhead 1,680,000 1,797,600
Total 3,360,000 3,774,960
Materials/unit 1.1387 1.2185
Direct labor/unit 2.2484 2.4057

Projected Operating Costs, New Automatic Equipment


Unit volume (000s) 496 546
Materials 542,223 638,197
Direct Labor 524,136 616,909
Overhead 1,566,211 1,675,846
Total 2,632,570 2,930,952
Materials/unit 1.0932 1.1697
Direct labor/ unit 1.0567 1.1307

Cash Flow (MXN)


(+) Cost Savings 727,430 844,008
(-) Tax on savings 254,601 295,403
(+) Sell old machine 175,000
Book Value old mach 250,000
Booked loss on asset sale 75,000
(-) Loss f depreciation of old machine (29,167) (29,167)
(+) Tax shield from write of 26,250
(-) Purchase new mach 3,500,000
Depreciation 350,000 350,000
(+) Tax shield from dep. 122,500 122,500
(+) Savage value
Total Cash flow (3,298,750) 566,163 641,938
NPV @ Pesos @12.19% 1,478,997
a) Convert in Euros @15.99MXN/E 92,495

Wacc in Euros 8.00%


Wacc in pesos 12.19% With Fisher effect adjusment

Euros CF's -$206,301 $34,084 $37,201


b) NPV in Euros @8% $92,495
NPV in pesos $1,478,997

Inflation Mexico 7% 7% 7%
Inflation Euro 3% 3% 3%
PPP mMXN/Euro $15.99 $16.61 $17.26

Gov rate I rate Mexico 9.12% 9.12% 9.12%


Gov rate I rate France 4.81% 4.81% 4.81%
I Rat MXN/Euro $15.99 $16.65 $17.33

ExperMXN/Euro $15.99 $20.00 $20.00

c) Adjust by inflation
(3,298,750) 566,162 621,430
NPV in pesos 869,715

Loan
Capex 3,298,750
Sedn to france 869,715 Max int rate
4,168,465 12.19%

Balance 4,168,465 4,168,465 4,110,613


Interest 508,310 501,255
Principal 57,852 120,175
Balance 4,168,465 4,110,613 3,990,438
2011 2012 2013 2014 2015 2016 2017

600 660 660 660 660 660 660


782,456 920,951 985,417 1,054,396 1,128,204 1,207,178 1,291,681
1,544,897 1,818,343 1,945,627 2,081,821 2,227,549 2,383,477 2,550,321
1,923,432 2,058,072 2,202,137 2,356,287 2,521,227 2,697,713 2,886,553
4,250,785 4,797,366 5,133,181 5,492,504 5,876,980 6,288,368 6,728,555
1.3037 1.395 1.4927 1.5971 1.7089 1.8286 1.9566
2.5741 2.7543 2.9471 3.1534 3.3742 3.6104 3.8631

600 660 660 660 660 660 660


751,158 884,113 946,001 1,012,221 1,083,076 1,158,891 1,240,014
726,101 854,621 914,445 978,456 1,046,948 1,120,234 1,198,651
1,793,155 1,918,676 2,052,983 2,196,692 2,350,460 2,514,993 2,691,042
3,270,414 3,657,410 3,913,429 4,187,369 4,480,484 4,794,118 5,129,707
1.2516 1.3392 1.433 1.5333 1.6406 1.7554 1.8783
1.2098 1.2945 1.3852 1.4821 1.5859 1.6969 1.8157

980,371 1,139,956 1,219,752 1,305,135 1,396,496 1,494,250 1,598,848


343,130 398,985 426,913 456,797 488,774 522,988 559,597

(29,167)

350,000 350,000 350,000 350,000 350,000 350,000 350,000


122,500 122,500 122,500 122,500 122,500 122,500 122,500

730,574 863,471 915,339 970,838 1,030,222 1,093,763 1,161,751

$40,755 $46,367 $47,315 $48,308 $49,347 $50,432 $51,564


7% 7% 7% 7% 7% 7% 7%
3% 3% 3% 3% 3% 3% 3%
$17.93 $18.62 $19.35 $20.10 $20.88 $21.69 $22.53

9.12% 9.12% 9.12% 9.12% 9.12% 9.12% 9.12%


4.81% 4.81% 4.81% 4.81% 4.81% 4.81% 4.81%
$18.04 $18.79 $19.56 $20.36 $21.20 $22.07 $22.98

$20.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00

683,820 783,440 915,339 970,838 1,030,222 866,394 888,710

3,990,438 3,793,219 3,472,331 2,980,414 2,373,014 1,632,161 964,795


486,601 462,552 423,422 363,437 289,369 199,029 117,649
197,219 320,888 491,917 607,401 740,853 667,365 771,061
3,793,219 3,472,331 2,980,414 2,373,014 1,632,161 964,795 193,734
2018 CAGR

660
1,382,099
2,728,843
3,088,611
7,199,553
2.0935
4.1335

660
1,326,815
1,282,556
2,879,415
5,488,786
2.0098
1.9427

1,710,767 10.0%
598,768

350,000
122,500
0
1,234,499

$52,744
7%
3%
$23.41

9.12%
4.81%
$23.93

$25.00

911,697

193,734
23,624
888,073
(694,339)

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