Groupe Ariel case

Inflatio Mexico Tax rate

7% 35% 2008

2009

Projected Operating Costs, Manual Process Unit volume (000s) Materials Direct Labor Overhead Total Materials/unit Direct labor/unit

496 564,816 1,115,184 1,680,000 3,360,000 1.1387 2.2484

Projected Operating Costs, New Automatic Equipment Unit volume (000s) Materials Direct Labor Overhead Total

496 542,223 524,136 1,566,211 2,632,570

Materials/unit Direct labor/ unit Cash Flow (MXN) (+) Cost Savings (-) Tax on savings (+) Sell old machine Book Value old mach Booked loss on asset sale (+) Tax shield from write of (-) Purchase new mach Depreciation (+) Tax shield from dep. (-) Service of loan Balance To principal Interest (9.21%) (+) Tax Shiel interest (+) Savage value Total Cash flow NPV @ Pesos @8% Convert in Euros @15.99MXN/E

1.0932 1.0567

727,430 254,601 175,000 250,000 75,000 26,250 3,500,000

3,500,000

(3,298,750) (532,801) (33,321)

350,000 122,500 550,422 3,271,928 228,072 322,350 112,823 157,730

2010

2011

2012

2013

2014

2015

546 600 660 660 660 660 664,788 782,456 920,951 985,417 1,054,396 1,128,204 1,312,572 1,544,897 1,818,343 1,945,627 2,081,821 2,227,549 1,797,600 1,923,432 2,058,072 2,202,137 2,356,287 2,521,227 3,774,960 4,250,785 4,797,366 5,133,181 5,492,504 5,876,980 1.2185 1.3037 1.395 1.4927 1.5971 1.7089 2.4057 2.5741 2.7543 2.9471 3.1534 3.3742

546 600 660 660 660 660 638,197 751,158 884,113 946,001 1,012,221 1,083,076 616,909 726,101 854,621 914,445 978,456 1,046,948 1,675,846 1,793,155 1,918,676 2,052,983 2,196,692 2,350,460 2,930,952 3,270,414 3,657,410 3,913,429 4,187,369 4,480,484 1.1697 1.1307

844,008 295,403

1.2516 1.2098

1.3392 1.2945

1.433 1.3852

1.5333 1.4821

1.6406 1.5859

980,371 1,139,956 1,219,752 1,305,135 1,396,496 343,130 398,985 426,913 456,797 488,774

350,000 122,500 550,422 3,022,851 249,077 301,345 105,471

350,000 122,500 550,422 2,750,834 272,017 278,405 97,442

350,000 122,500 550,422 2,453,764 297,070 253,352 88,673

350,000 122,500 550,422 2,129,334 324,430 225,992 79,097

350,000 122,500 550,422 1,775,024 354,310 196,112 68,639

350,000 122,500 550,422 1,388,082 386,942 163,480 57,218

226,154

306,761

401,723

444,014

489,055

537,019

2016

2017

2018

CAGR

660 660 660 1,207,178 1,291,681 1,382,099 2,383,477 2,550,321 2,728,843 2,697,713 2,886,553 3,088,611 6,288,368 6,728,555 7,199,553 1.8286 1.9566 2.0935 3.6104 3.8631 4.1335

660 660 660 1,158,891 1,240,014 1,326,815 1,120,234 1,198,651 1,282,556 2,514,993 2,691,042 2,879,415 4,794,118 5,129,707 5,488,786 1.7554 1.6969

1.8783 1.8157

2.0098 1.9427

1,494,250 1,598,848 1,710,767 522,988 559,597 598,768

350,000 122,500 550,422 965,502 422,579 127,842 44,745

350,000 122,500 550,422 504,003 461,499 88,923 31,123

588,086

642,452

350,000 122,500 550,422 0 504,003 46,419 16,247 0 700,323

10.0%

Inflatio Mexico Tax rate

7% 35%

2008 Projected Operating Costs, Manual Process Unit volume (000s)

Materials Direct Labor Overhead Total Materials/unit Direct labor/unit

2009

2010

496 546 564,816 664,788 1,115,184 1,312,572 1,680,000 1,797,600 3,360,000 3,774,960 1.1387 1.2185 2.2484 2.4057

Projected Operating Costs, New Automatic Equipment Unit volume (000s) 496 546 Materials 542,223 638,197 Direct Labor 524,136 616,909 Overhead 1,566,211 1,675,846 Total 2,632,570 2,930,952 Materials/unit Direct labor/ unit

a)

Cash Flow (MXN) (+) Cost Savings (-) Tax on savings (+) Sell old machine Book Value old mach Booked loss on asset sale (-) Loss f depreciation of old machine (+) Tax shield from write of (-) Purchase new mach Depreciation (+) Tax shield from dep. (+) Savage value Total Cash flow NPV @ Pesos @12.19% Convert in Euros @15.99MXN/E Wacc in Euros Wacc in pesos Euros CF's

1.0932 1.0567

1.1697 1.1307

727,430 254,601

844,008 295,403

(29,167)

(29,167)

175,000 250,000 75,000 26,250 3,500,000

(3,298,750) 1,478,997 92,495

350,000 122,500

350,000 122,500

566,163

641,938

8.00% 12.19% With Fisher effect adjusment -$206,301

$34,084

$37,201

b)

NPV in Euros @8% NPV in pesos

$92,495 $1,478,997

Inflation Mexico Inflation Euro PPP mMXN/Euro

7% 3% $15.99

7% 3% $16.61

7% 3% $17.26

Gov rate I rate Mexico Gov rate I rate France I Rat MXN/Euro

9.12% 4.81% $15.99

9.12% 4.81% $16.65

9.12% 4.81% $17.33

ExperMXN/Euro

$15.99

$20.00

$20.00

c) Adjust by inflation NPV in pesos Loan Capex Sedn to france

Balance Interest Principal Balance

(3,298,750) 869,715

566,162

621,430

3,298,750 869,715 Max int rate 4,168,465 12.19% 4,168,465

4,168,465

4,168,465 508,310 57,852 4,110,613

4,110,613 501,255 120,175 3,990,438

2011

2012

2013

2014

2015

2016

2017

600 660 660 660 660 660 660 782,456 920,951 985,417 1,054,396 1,128,204 1,207,178 1,291,681 1,544,897 1,818,343 1,945,627 2,081,821 2,227,549 2,383,477 2,550,321 1,923,432 2,058,072 2,202,137 2,356,287 2,521,227 2,697,713 2,886,553 4,250,785 4,797,366 5,133,181 5,492,504 5,876,980 6,288,368 6,728,555 1.3037 1.395 1.4927 1.5971 1.7089 1.8286 1.9566 2.5741 2.7543 2.9471 3.1534 3.3742 3.6104 3.8631

600 660 660 660 660 660 660 751,158 884,113 946,001 1,012,221 1,083,076 1,158,891 1,240,014 726,101 854,621 914,445 978,456 1,046,948 1,120,234 1,198,651 1,793,155 1,918,676 2,052,983 2,196,692 2,350,460 2,514,993 2,691,042 3,270,414 3,657,410 3,913,429 4,187,369 4,480,484 4,794,118 5,129,707 1.2516 1.2098

1.3392 1.2945

1.433 1.3852

1.5333 1.4821

1.6406 1.5859

1.7554 1.6969

1.8783 1.8157

980,371 1,139,956 1,219,752 1,305,135 1,396,496 1,494,250 1,598,848 343,130 398,985 426,913 456,797 488,774 522,988 559,597

(29,167)

350,000 122,500

350,000 122,500

350,000 122,500

350,000 122,500

730,574

863,471

915,339

970,838 1,030,222 1,093,763 1,161,751

$40,755

$46,367

$47,315

$48,308

350,000 122,500

$49,347

350,000 122,500

$50,432

350,000 122,500

$51,564

7% 3% $17.93

7% 3% $18.62

7% 3% $19.35

7% 3% $20.10

7% 3% $20.88

7% 3% $21.69

7% 3% $22.53

9.12% 4.81% $18.04

9.12% 4.81% $18.79

9.12% 4.81% $19.56

9.12% 4.81% $20.36

9.12% 4.81% $21.20

9.12% 4.81% $22.07

9.12% 4.81% $22.98

$20.00

$25.00

$25.00

$25.00

$25.00

$25.00

$25.00

683,820

783,440

915,339

970,838

1,030,222

866,394

888,710

3,990,438 486,601 197,219 3,793,219

3,793,219 462,552 320,888 3,472,331

3,472,331 423,422 491,917 2,980,414

2,980,414 363,437 607,401 2,373,014

2,373,014 289,369 740,853 1,632,161

1,632,161 199,029 667,365 964,795

964,795 117,649 771,061 193,734

2018

CAGR

660 1,382,099 2,728,843 3,088,611 7,199,553 2.0935 4.1335

660 1,326,815 1,282,556 2,879,415 5,488,786 2.0098 1.9427

1,710,767 10.0% 598,768

350,000 122,500 0 1,234,499

$52,744

7% 3% $23.41 9.12% 4.81% $23.93 $25.00

911,697

193,734 23,624 888,073 (694,339)