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5.7.2 Analysis Methodology
(1)FIRR
The FIRR (financial internal rate of return) is defined as the discount rate that balances the current value of the difference between net expenditure and net income and is expressed by the following formula:

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The FIRR expresses the rate of interest on borrowed funds at which a profit can be made and it can act as useful reference for directly determining profitability.
(2)Profit and Loss Balance
Whereas the FIRR cannot detect changes in profitability over the years, the profit and loss balance traces changes in the difference between each year's income and expenditure and is used to assess the financial constitution of an undertaking over time. In this case, it was decided to calculate the year when an annual profit is first recorded and the year when the cumulative balance first enters the black as the main indicators.
(3)Sensitivity Analysis
Because each analysis involves the setting of assumptions, the conclusions are greatly influenced by the propriety of those assumptions. Here, in order to remove future uncertainty, it was decided to conduct financial analysis for a number of alternative cases of differing prerequisite factors, and carry out sensitivity analysis in order to identify those factors that influence the financial analysis most.

 

 

 

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