New guidelines for project studies issued

Title

Language

English

Source

Business Day Special Report March 27, 1974

Year

1974

Rights

In Copyright - Educational Use Permitted

Fulltext

Page 8 Business Day March 27, 1974 New guidelines for project studies The Board of Invest ments issued last week new guidelines for the preparation of project feasibility studies by applicants applying for tax incentives regis tration either under the Investment Incentives Act or the Export Incen tives Act. Following recent administrative decisions, 'the Board is also doing away with the project study requirement for existing and expansion projects to facilitate pro cessing of these applic ations. Instead a project report is required. Simplification The new guidelines are intended to simplify the project details re quired by the Board. The new format contains simplified cost, income, and operating state ments. However, a proponent is still required to make a detailed account of the technical, product and market aspects of the projects. As amend d, the new project gunlines are as by-products ^ .3 from the operations. _ esti’matei jiWz'X itJ annual volume 1. Give a brief sum- and value of domestic mary of major market, technical and financial characteristics of the project and conclusions regarding its feasibility. 2. Outline the time table and present posi tion of the project. 3. Specify proposed management for the pro ject, including type of business organization, organization chart and functions of each unit, use of professional firms or consultants, etc. 4. Outline the agree ments proposed or enter ed into with other parties which affect the operations of the pro ject (e.g. technical assist ance, foreign loans, patents, contracts of sales, etc.). Terms and conditions should be specified. Product and market aspects 1. Describe products to be produced, indi cating specifications rela ting to their physical, chemical and/or agro nomic properties, which ever applicable. Specify resulting and overseas sales of each product for the first ten years of the project's life. If total capital expenditures is below P1 million, and the project has a short gestation period, pro jections for only 5 years are required where 10 years projections are asked for. Specify the export markets, where applicable. Outline the assumptions underlying the projections. 3. Give the proposed selling prices of each product in both the local and overseas mar kets. Show basis for determining prices and extent of possible varia tions. 4. Outline the pro posed marketing arrange ment for the products, i. e. channels of distri bution, selling organ ization, etc. Indicate especially trade names to be use, long-term con tracts, guaranteed mar kets, importers contact ed in overseas markets and the status of these customers, affiliations with other companies or bodies for marketing purposes (local and over seas), terms of sales 'and sales schedule showing inventory levels. Technical aspects 1. Describe the processes and/or production methods, showing detail ed flow chart. ( Specify maintenance and other support facilities pro posed, and quality con trol and requirements for the processes adopt ed. 2. Specify major machinery and equip ment requirements. Indi cate: a. Number, specific ations, rated capa cities and life of major pieces of equipment, whe ther new or sec ond-hand, allo cated to categories according to major use (e.g. produc tion maintenance, waste disposal, etc.). Outline func tion to be per formed by each major unit. b. Quotations from suppliers, machine ry guarantees, deli very and payment terms and other arrangements. Indi cate also supplier, country or port of origin, taxes, duties, instali*t:o;i and for costs ances equipment, etc. State why import ed equipment and not locally pro duced equipment is used for each item, where applic able. c. Is equipment to be exclusively used for the'production of the products specified? If not, specify to what extent equipment will be used for other purposes. 3. Enclose plans and drawings of major struc tures, physical layout of site and plant and machinery layout, indi cating also provisions for expansion. Enclose cost quotations for land and major structures (includ ing contingencies land improvements and addi tional infrastructure) and allowances for minor structures. 4. Specify rated an nual and daily capacity of plant at a specified number of shifts per day and number of operating days per year. Give also the expected attainable annual production volume of each product of > Jw- for the first ten years minor the project's life. issued 5. Show volume and value of material inputs per unit output (and the respective wastage fac tors, if applicable) for each product to be sepa rating imports, locally purchased imports (e.g. from dealers) and locally produced inputs. Also: a. For locally pro duced material inputs and locally purchased imports, give delivered price at factory, or transfer price if produced by appli cant. b. For imported material inputs, give current CIF price, tariff, sales ., tax, other charges and delivered price at factory. c. Give details of prospective sources of major inputs, consignment ar- ' rangements, supply contracts etc. 6. Specify special re-" quirements and costs for electricity, water and other utilities. 7. Detail total labor requirements from start of operations until normal production capa city is attained. Also: (Continued on page 10) Page 10 Business Day March 27, 1974 New guidelines for project studies issued (Continued from page 8) a. Indicate number of workers according to skill, sex, and whether full time/ part time/seasonal, at normal produc tion capacity. b. Specify wage rates, salaries, fringe benefits, etc. as sumed. c. Justify foreign per Sell your rights. GET CITIFINANCE RECEIVABLES FINANCING With or without notice to your cus tomers. Almost any way you want it. Whether you're a manufacturer, producer, processor, distributor, or dealer. Big or small. Don't tie up working capital in receivables. Convert those rights into cash. So you can buy more inventory, raw materials or equip ment or implement projects or meet expenses. Get Citifinance Re ceivables Financing at any of our 18 offices nationwide. At the most liberal terms and reasonable rates available. You can't go wrong when you sell your rights to receivables. Or pledge the receivables to us. 'For you get the best prices and terms. You can sell us current recei vables. Or future receivables as you create them. Individually or in bat ches. With or without recourse. OUR SERVICES: Personal Finance (cars, appliances and household needs: educational, medical, travel, home improvements, weddings and other needs). Inventory Financing, Sales Financing, Receivables Financing. Leasing, Equipment Financing. Real Estate Financing. Small Business Financing. Agribusiness Financing. Funds Investments. Non-life Insurance. OUR OFFICES: Metro Manila: Makati. Cubao. Parafiaque, Caloocan, Marikina. Luzon: Naga, Legaspi. Batangas, Tarlac, Dagupan, San Fernando (L.U.) Visayas: Cebu. Bacolod. Iloilo. Mindanao: Davao. Cagayan_de Oro, General Santos, lligan. sonnel involved, if any. d. Set out details of special training programs, includ ing costs. Financial aspects 1. Specify sources selected or proposed for short-term financing, long-term financing, and suppliers credits, and their respective uses. Also indicate (if possi ble): a. Amount and terms of financing from each source select ed, indicating cur rency, security, repayment period, interest and other features. b. Status of financing from each source relating to actual releases already made, applications already approved, applications pend ing and applic ations still to be made. For equity financing, indicate subscriptions made. 2. Prepare two sets of the following statements, one set assuming no BO I incentives and one set assuming BOI incentives, for each of the first ten years of the project's life. For projects with capital expenditures below P1 million and of a short gestation period (and thus projecting for only five years), use alternative profitability evaluations - these are to be specified. Such pro ponents may wish how ever, to extend the cash flow period to ten years to enable discounting measures to be used; this is advised. a. Cost of sales and operating expen diture statements (see also Item E. 7) b. Profit and Loss (or Income) Statement c. Cash Flow State ment d. Balance Sheet Statement 3. The following financial evaluations are to be derived on the basis of the information contained in these state ments, both with BOI incentives and without BOI incentives. a. Profitability eval uation, calculating discounted rate of return on total in vestment, discount ed rate of return on capital stock and net present value. b. Profitability ratios, calculating gross operating profit ratio (net oper ating proit as a ratio of sales) and net profit after tax 3 ratio for each year and average, over the projected oper- . ating period. c. Solvency ratios, calculating debt to equity ratio and debt service cover age for each year. d. Break-even analy sis, calculating break-even price and capacity. Enclosures to be attached to study 1. Bio-data on prin cipal officers. 2. Certified copies of all export and domestic sales con tracts. 3. Certified copies of all parents, tech nical and manage ment agreements foreign loan con- ’ tracts and all other agreements pro posed or entered into with other parties. 4. Copies of quota tions for machine ry, structures, inputs, etc. 5. Clearances from proper authorities for waste disposal and emission con trol. 6. Relevant back ground data com piled for the pro ject study. 7. For applicants under R.A. 6135: a) Computation for tax credit on raw mate rials and sup plies. b) Computation of standard raw material usages.

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8, 10

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