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3. Financing Activities Operating activities are those which produce either revenue or are direct cost of producing a product or service, in our case it refers to sales and the sales growth per year. Investing activities include buying and selling noncurrent assets, which will be used to generate revenues over a long period of time, in our case it refers to the costs of building, sheds, stickers, kilns and its respective depreciation. Financing activities -include borrowing and repaying money, issuing stock (equity) and paying dividends, for the project it was directed to the bank loan for the initial investment. The cash flow analysis was conducted in Microsoft Excel for a period of 20 years. According to Govett et al.(2006), 20 years is a good year analysis period for drying investments due to the life expectations of the equipment. In the Microsoft Excel spreadsheet, 21 columns were used: 20 for the 20 years of evaluation of the project and 1 with year “0” to represent the initial investments. Within the worksheet created, the sales values were calculated by increasing the value 4% each year. The sales increase rate is generally provided by the company in study; however the flooring manufactures in study could not provide this information. In examples from Keown et. al (2006) the sales increase rate were of 4%. The total fixed and variable costs obtained for objective 1 were used in the model. The formulas to calculate total costs and depreciation are shown in Appendix II. The income before depreciation and tax was calculated by subtracting costs from the sales. Then, the profits before taxes and interest were calculated by subtracting depreciation form the total costs of investing activities. Then, the tax rate was applied to the obtained results and the interest rate was applied to the loan. Finally the net cash flow was obtained by subtracting the depreciation and amortization values from the net profits. After completing the cash flow analysis, the net present value and the internal rate of return were calculated using equations in Microsoft Excel. The formula that Excel uses to compute the values of NPV and IRR are, respectively, the following: 47PDF Image | Impact of Vacuum-Drying on Efficiency of Hardwood Products
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