Tone’s Company

Tone Company
Student’s Name
Institution
Market revenue (sales) of Tone Company
The figure below shows the projected revenue for Tone Company over a period of five years. The projected sales for year 4 and 5 will be calculated as follows.
Sales in year 4= (sales in year 3/sales in year 2) * sales in year 3
Sales in year 5= (sales in year 4/sales in year 3) * sales in year 4*0.6
We assume that the company is going to grow at the same rate ignoring political uncertainties.
The growth rate in year 5 may slow down due to the entry of new players thereby using a factor of 0.6.
Market Revenue in year 1($) Revenue in year 2($) Revenue in year 3($) Revenue in year 4($) Revenue in year 5($)
Indonesia
5,139,966 32,459,310 82,599,304 210,190,697.87 320,923,741.47
Philippines
1,093,826 6,726,345 17,245,074 44,213,101.95 68,012,409.26
Kenya
315,288 2,341,868 6,146,761 16,133,561.24 25,407,703.17
India
3,279,360 25,365,472 67,895,707 181,736,300.00 291,871,909.41
Bangladesh
148,428 1,721,734 4,852,293 13,675,020.27 23,123,852.52
Madagascar
23,022 353,100 1,035,834 3,038,663.48 5,348,429.82
Sri Lanka
16,617 187,791 527,362 1,480,958.51 2,495,331.21
Malaysia
101,859 1,529,400 4,525,377 13,390,242.57 23,772,418.90
Nigeria
98,128 4,070,897 13,345,498 43,750,140.78 86,054,854.69
Total
10,396,493 74,755,918 198,173,171 525,344,437.67 835,592,760.00

EBITDA
We get the gross profit by subtracting the revenue earned by the COGS.

The figure obtained is essentially is also referred to as the gross profit which is EBITDA.We will make the assumption that COGS grows as follows:
COGS in year 4= (COGS in year 3/sales in year 2) * COGS in year 3
COGS in year 5= (COGS in year 4/sales in year 3) * COGS in year 4
YEAR
SALES ($) COGS($) EBITDA($)
1
10,396,493 3,583,800 6,812,693.00
2
74,755,918 4,658,940 70,096,978.00
3
198,173,171 6,056,622 192,116,549.00
4
525,344,437.67 7,873,608.60 517,470,829.07
5
835,592,760.00 10,235,691.18 825,357,068.82
FREE CASH FLOW
We get the cash flow by subtracting the marketing revenue and COGS from EBITDA.
The marketing revenue is clearly growing in relation to increases in revenue.
We calculated the marketing cost by taking 30% of revenue in each and every year.
YEAR
SALES ($) MARKETING COST($) COGS($) CASHFLOW($)
1
10,396,493 3,118,948 3,583,800 3,693,745
2
74,755,918 22,426,775 4,658,940 47,670,203
3
198,173,171 59,451,951 6,056,622 132,664,598
4
525,344,437.67 157,603,331.30 7,873,608.60 359,867,498
5
835,592,760.00 250,677,828.00 10,235,691.18 574,679,241
INTERNAL RATE OF RETURN
The IRR is the return obtained in a project when the bet present value of a project is zero. At the moment it is difficult to obtain the NPV as we do not have the value of the initial investment made in the project. However, it is important to note that the project will experience unprecedented growth.