1. CASH FLOW ANALYSIS PROFITABILITY

2. GENERAL CASH FLOW APPROACH CASH FLOW ANALYSIS PROVIDES A RIGOROUS METHOD TO COMPARE PROFITABILITY USES THE SAME COMPONENTS AS ROI CALCULATIONS ALLOWS FOR THE TIME VALUE OF MONEY AND ALSO FOR CHANGES IN COMPONENTS OVER TIME

3. CASH FLOW COMPONENTS INVESTED CAPITAL COMPONENTS FIXED CAPITAL WORKING CAPITAL SALVAGE – ($0 FOR OUR ANALYSIS) CAN INCLUDE LAND, BUT THIS IS TREATED LIKE WORKING CAPITAL - NOT INCLUDED IN OUR ANALYSIS CAN INCLUDE PLANT AND CORPORATE COMPONENTS, BUT THESE DEPEND ON EACH ORGANIZATION - NOT INCLUDED FOR OUR ANALYSIS.

4. CASH FLOW COMPONENTS REVENUE COMPONENTS REVENUES ARE BASED ON PRICE AND PRODUCTION RATE THESE CAN CHANGE OVER TIME AND WITH TOTAL PRODUCTION RATE ASSUME PRODUCTION AT DESIGN RATE AND A CONSTANT PRICE FOR THE PRODUCT OVER THE PLANT LIFE, FOR THIS PROJECT.

5. COM COMPONENTS VARIABLE COMPONENTS RAW MATERIALS UTILITIES FIXED COMPONENTS INSURANCE PROPERTY TAXES ALLOCATED COMPONENTS LABOR MAINTENANCE LABORATORY DEPRECIATION BASED ON A DEFINED SCHEDULE ADDED BACK IN AS A POSITIVE CASH FLOW

6. CASH FLOW CURVE - CONSTANT $

7. DISCOUNTED CASH FLOW (DCRR) ALSO CALLED –INTERNAL RATE OF RETURN (IRR) –OR NET PRESENT WORTH (NPW) METHOD HAS BECOME A STANDARD FOR MANY COMPANIES. CAN BE DEFINED AS THE MAXIMUM INTEREST RATE AT WHICH FUNDS COULD BE REPAID FOR A 100% DEBT PROJECT WITH A TERM OVER THE LIFE OF THE PROJECT BASED ON DISCRETE OR CONTINUOUS CASH FLOWS, THOUGH NORMALLY CONTINUOUS ARE TREATED AS EQUIVALENT ANNUAL DISCRETE VALUES.

8. CALCULATION METHODOLOGY CALCULATE CASH FLOWS BASED ON CONSTANT $ AMOUNTS DETERMINE THE DISCOUNT RATE THAT WILL CONVERT THE CUMULATIVE SUM OF ANNUAL CASH FLOWS TO A $0 VALUE OVER THE LIFE OF THE PROJECT THE HIGHER THE DISCOUNT RATE, THE MORE PROFITABLE THE PROJECT.

9. DCRR CASH FLOW CURVE

10. DCRR EXAMPLE ASSUME PROJECT CASHFLOW DCRR Example YEAR012345678910NPV CASH FLOW CONSTANT $-1000100120160180200220240220200180820 DISCOUNT RATE 5.00%-100095109138148157164171149129111370 10.00%-10009199120123124 123103856961.6 11.25%-10009097116117 1161149477620 15.00%-10008791105103999590725744-156

11. GRAPHICAL RESULTS

12. PRIUS EVALUATION GIVEN:PRIUS PURCHASED - SEPT 2002 WANTED:NPV OF INVESTMENT BASIS:CAPITAL COST FOR PRIUS = 20000 CAPITAL COST FOR CONVENTIONAL - 16,500 INCOME TAX REBATE = 2000 MILEAGE DRIVEN PER YEAR = 12000 GAS MILEAGE = 42 mpg GAS MILEAGE CONVENTIONAL = 22 mpg GAS PRICES AVERAGED FOR EACH YEAR ASSUME INFLATION RATE OF 3%/YEAR

13. PRIUS NPV PRIUS CALCULATION (YEAR STARTS IN SEPT) YEARSep-02200220032004200520062007200820092010201120122013 CALC YEAR0123456789101112 CAPITAL PRIUS20000 CAPITAL CONV16500 DELTA CAPITAL-3500 TAX REBATE2000 NET CAPITAL-1500 MILES DRIVEN 12000 GAL CONVENT 545 GAL PRIUS 286 DELTA GAS 260 GAS PRICE/GAL 1.7522.252.52.7533.53.75444.25 INFLATION ADJ. 0.97 SAVINGS 4415045676306937568829451008 1071 CASH FLOWS-15004415045676306937568829451008 1071 DISCOUNT RATE NPV 5.00%-15004204574905185435646276396506196265965249 10.00%-1500401416426430 4274534414273893753413456 15.00%-15003833813733603443273323092862492302002275 38.78%-15003182622121701351068969533829210