The document presents cash flow projections for a proposed electricity project by the Maribor Electricity Board (MEB) in Slovenia. It shows that the total cost of the project would be $2.5 billion. In the first 5 years of operation, the MEB expects sales to increase from $3 billion in Year 1 to $4.6 billion in Year 5. Operating expenses are also projected to rise over the 5 years. The net present value of the project is positive at a 10% discount rate but turns negative at a 40% rate. The internal rate of return is calculated to be 35.49%. Socio-economic factors like higher import costs and labor rates are also noted.

1. Maribor Electricity Board
Cash Flows for the Project
1
Glavni Most, Dusk, Maribor, Slovenia.

2. Maribor Electricity Board (MEB)
Project Cost : US$/Million
Building 600
Plant 1200
Add 50+50+50. 150 1350
Trial Run(net) (500 – 150) 350
Working Capital 200
Total Cost = Outflows 2,500
**Interest
2

3. Maribor Electricity Board (MEB)
Operating Expenses (US $ Million)
Year I II III IV V
Material 600 600 850 850 850
Manpower 900 900 1,450 1,450 1,450
Others 500 500 900 900 900
Depreciation. 300 300 300 300 300
Interest 100 100 100 100 100
Total 2,400 2,400 3,600 3,600 3,600
3

4. MEB: Cash Inflows (Million $)
Year I II III IV V
Operation % 50 50 70 70 70
a) Sales 3,000 3,000 3,600 3,600 4,600
b) Total Expenses 2,400 2,400 3,000 3,000 3,000
c) Profit (Loss) 600 600 600 600 600
d) Cash Inflows
C + Interest + dep.
(no. tax)
1,000 1,000 1,000 1,000 1,000
+ 800
4

5. MEB
Discount
rate 10%
PV 10% Discount
rate20%
PV 20%
0
1
2
3
4
5
(2500)
1000
1000
1,000
1,000
1,000
+ 800
5,800
1.0
0.909
0.826
0.751
0.683
0.621
(2500)
909
826
751
683
621
+497
4,287
1.0
0.833
0.694
0.579
0.482
0.402
(2500)
833
694
751
482
402
+322
3,484
5nd

6. MEB
Discount
rate 10%
PV 10% Discount
rate 40%
PV 40%
0
1
2
3
4
5
(2500)
1000
1000
1,000
1,000
1,000
+ 800
5,800
1.0
0.909
0.826
0.751
0.683
0.621
(2500)
909
826
751
683
621
+497
4,287
1.0
0.7143
0.5102
0.3644
0.2603
0.1859
(2500)
714.3
510.2
364.3
260.3
185.9
+148.72
6nd

7. NBEC
Payback period 2.5 Yrs.
NPV 10% = PV(I) – PV (II)
4287– 2,500 = 1,787
NPV 20% = 3,484 - 2,500 = 984
NPV 30% = 2650.9 – 2500 = 150.9
NPV 40% = 2183.8 – 2500 = - 316.2
PI 10% = 4287 / 2500 = 1.71
PI 20% = 3,484 / 2500 = 1.34
PI 30% = 2650.9 / 2500 = 1.06
PI 40% = 2183.8 / 2500 = 0.87
7nd

8. MEB
IRR = RL + { NPV(L) / (PV(I)L – PV (I)H} *
(RH – RL)
= 10% + {1787 / (4287 – 2187.8)} * (40 – 10)
= 10 % + (0.8497) * 30
= 10 + 25.49
= 35.49
8nd

9. MEB: Social-Cost Benefit
• Building construction would require
imported cement having open maket price
higher by 25%
• Electricity charges @ $ 2 per unit is
administered price while it market price is
$ 3 per unit
• Manpower cost is 160 % of international
price
nd 9

10. MEB: Social-Cost Benefit
• Building construction would require
imported cement having open maket price
higher by 25%
• Electricity charges @ $ 2 per unit is
administered price while it market price is
$ 3 per unit
• Manpower cost is 160 % of international
price
nd 9