Sonnedix Harvard Case Solution & Analysis

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Based on information in the case, prepare 2 sets of financial statements for the Board.  These should include balance sheets, income statements and cash flow statements, prepared using the indirect method.  Although the French tax year is equivalent to the calendar year, you may assume that the first interest and tax payments should be made 6 months after commencement of commercial operation with no principal repayments or shareholder distributions until 12 months after the commencement of commercial operation.

A semi-annual model for 20 years of operations: 

A semi-annual model has been prepared which included Income statement, balance sheets, and cash flow statements through indirect method. The projections are made by assuming payments for tax and interest after six months.  Detailed model showing 20 years projection would give an idea of profits, cash positions and debt burden through (Amortization table) to company.  

Note: Working is attached in excel file.

A monthly model that should cover the first 12 months following the commencement of electricity generation assuming that construction of the Grasse project commences at the beginning of October.

Note: Working is attached in excel file.

How would these forecasts change if the project is delayed so that construction started at the beginning of May? Compare the monthly and annual figures for net income as well as cash flows.  Explain.

If the project is delayed and the construction starts in the month of May rather than October, then the interest will be charged from the month of October up to May, the company will be bearing the financial cost. Whereas the income and cash will be generated afterwards. This will lead the company towards liquidity crises. Late construction would lead to losses because all fixed expenses have to be endured by the company without profits and returns...........................

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