According to the construction program, by the year 2000 the corporation will have manufactured and sold 40,000 square meters of bamboo flooring and 30,000 square meters of bamboo decorative planking, obtaining a sales revenue of RMB 10,150,000. From 2001 on, the production capacity will be gradually increased to 70,000 square meters of bamboo flooring and 50,000 square meters of bamboo decorative planking, achieving a sales revenue of RMB 20,300,000.　

The explanatory notes on the estimation are as follows:
a. The fixed assets depreciation rate is 9% and the salvage value is on the basis of 10% of fixed assets.
b. All other manufacturing expenses are based on present actual cost.
c. Packing cost, one part of marketing expenses, has been included in subsidiary material. Since the products are mainly exported, the marketing expense is relatively low, constituting about 1% of total sales value.
d. Sales tax and surtax are based on 6.5% of sales revenue.
e. The “Others” in administrative expense means various additional administrative expenses after the implementation of the project, such as newly-increased office allowance, business entertainment, insurance, etc., accounting for 2% of sales revenue.
f. The wages and welfare benefits of production workers will be paid on a piecework basis, amounting to 9% of sales value.
g. After going into operation, there will be an additional current capital of RMB 2,500,000 with a yearly interest rate of 9%.　

After the implementation of the project, the newly-added fixed cost is as follows: (RMB in 10 thousand per annum)
Depreciation of fixed assets: 44.2
Wage of superintendence: 24.0
Interest of loan: 32.0
Amortization of deferred assets: 5.0
Total: 105.2

According to Table 2, the variable cost of unit sales value is RMB 151.7/m².
Variable cost percentage=74.7%
Marginal contribution ratio =( Fixed cost + Profit) / Sales revenue=25.3%
Break-even sales revenue = 105.2/0.253=415.8

3 Analysis of Cash Flow and Investment Recovery

According to Table 3, we can get the following data:
Net present value in 5-year period: RMB 5,934,000
Static investment recovery period: 2.96 years
Dynamic investment recovery period: 3.21 years
Internal rate of return: 31.46%　

In this project, the foreign party will invest RMB4,000,000. Referring to “Cash Flow from Operation” in the Table of Cash Flow, by the end of the third year, the accumulative cash flow operation has been RMB 7,996,000. Therefore the total investment can be recovered within 3 years.　

After analyzing the effects on profit that such five factors have as unit price, variable cost per unit, fixed cost, sales value and unit price of raw material, we can obtain the results as shown in Table 4 and Figure 2 and Figure 3.　

According to Table 4, unit price has the greatest effect on profit with an elasticity coefficient of 4.98. The next is variable cost per unit and then unit price of raw material.　

When the unit price decreases by 20%, the project begins to lose money. However, this situation is almost impossible to occur, because as a resource-based product, its supply is limited by the supply of resource, especially when it comes to raw bamboo, which nearly originates in China only. Furthermore, the corporation’s international trade is settled by U.S. dollars and thus evades foreign exchange risk.

When the price of raw material rises by 40%, the project begins to incur a loss. But it is barely possible since the present price of bamboo has risen by 200% than that of the previous years.　

The break-even sales value accounts for 20.5% of normal sales value only. As a result, the risk of insufficient sales is quite small.