FINANCIAL STUDY

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Introduction

Having already established the technical and marketing aspects of the study,
Magnum will now try to incorporate all pertinent information gathered to determine
the financial feasibility of W.I.T.

A comprehensive discussion of key quantitative indicators will be presented in

this part of the study. This section will start off by presenting information regarding
the project’s total cost, initial capital requirements, the correct mix of financing as
well as sources for such. Assumptions were already made regarding several factors
concerning the financial projections. Financial statements and analysis of such will
also follow. This will provide insight regarding the financial potential of W.I.T as a
business.

The analysis and detailed evaluation of all generated projections is the basis
for Magnum’s conclusion that W.I.T is financially sound and capable of competing in
the industry.

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Executive Summary

In order to realize the financial feasibility of W.I.T, Magnum conducted

financial analysis to be able to conclude whether it is a business worth undertaking.
The study started with an estimation of the total investment which will be required to
set up the business. This amounted to Php 2,993,034.21, which includes registration
fees, fixed assets, pre-operating/promotion expenses, as well as initial working capital
requirements necessary to start up the business.

In order to determine the optimal capital structure, Magnum employed the

EBIT-EPS approach. Based on the findings, it was concluded that the optimal mix of
70% debt and 30% equity yielded the highest EPS among the options considered and
was therefore chosen. This translates to a Php 2,095,123.95 loan requirement and
almost Php 900,000 in equity. Having been backed up by reputable guarantors,
Magnum is certain to raise the necessary amounts required.

Based on the resulting projections as reflected by the financial statements,

particularly the Income Statement, it turns out that Magnum stands to earn a positive
net income in its first year of operations. Though the amount is relatively small, it
signals that the business can stand to gain more as it continues its operations despite
the additional cost of the 12% VAT and corporate taxes.

In addition, the net present value, computed for the operating cash flows for
Years 1 to 10 is found to be positive and greater than zero. The internal rate of return
computed for resulted to 29%, and the payback period for the business is 4.56 years.
As such, it is determined that the company would earn a return greater than 20%,
communicating an attractive market value to the investors and increased wealth for
the owners.

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Financial Ratios were derived to assess the performance of W.I.T. Based from
the resulting liquidity, activity, debt, and profitability ratios, W.I.T.’s business
operations are indeed efficiently and effectively managed.

A Sensitivity Analysis using a pessimistic scenario of 20% unmet target

revenue and an optimistic scenario of 20% increase in target revenue were used to
assess risk and used several possible return estimates to obtain a sense of variability
among outcomes.

It can be concluded based on the results of the financial analysis that W.I.T is a
promising business venture.

FINANCIAL STUDY

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Initial Investment (see Exhibit 1)

Total initial investment required to start the business is estimated to be Php

2,993,034.21. This amount includes registration fees, fixed assets, pre-
operating/promotion expenses, as well as initial working capital requirements
necessary to start up the business.

Payments for legal transactions with the SEC, BIR, DTI and Local City
Government comprise the registration fees. Purchases made for the equipments,
furniture and fixtures for the office, plant and the store as well as the delivery van are
also included in the initial investment. Renovations and construction works of the
plant and office as well as the store site is also part of the initial costs.

The pre-operating costs consist of outlays for promotional activities, most

specifically the initial print materials and the expenses for the launching of the store
which will be conducted through a ribbon cutting ceremony. The required initial
working capital is composed of payments for supplies and purchases of materials for
initial production runs. A month’s worth of salary payments and a two-month deposit
for the store rent will also form part of the initial investment. Cash on hand (set at
100,000) will also be required for other pre-operating expenses which will arise prior
to start of business.

Exhibit 1
PROJECT COST- INITIAL INVESTMENT

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Magnum Inc.
Project Cost-Initial Investment

Registration Fees Cost

SEC 3,189.00
BIR 500.00
DTI 515.00
Business Permit 7,472.00
Total Registration Fees 11,676.00
Fixed Assets
Land 550,000.00
Plant and Plant Assets
Plant Structure 250,000.00
Equipment
Small UV Exposure Unit 20x24 13,037.47
4 Color 4 Station Manual Press 108,385.00
Fire Extinguisher 1,200.00
Paint Curing Machine 5,500.00
Furniture and Fixtures
Storage Cabinets 4,000.00
Long Wood Tables 1,500.00
Plant Improvements 19,800.00
Store Assets
Equipment
Point of Sale System 17,000.00
Display Materials 10,000.00
Furniture and Fixtures
Mannequin 6,000.00
Fire Extinguisher 1,200.00
Leasehold Improvements 477,381.00
Office Assets
Equipment
4-in-1 office machine 15,000.00
Personal Computer 50,000.00
Fire Extinguisher 1,200.00
Furnitures and Fixtures
Chairs,Tables 21,000.00
Filing Cabinets 4,500.00
Vehicle 800,000.00
Total Fixed Assets 1,845,122.47
Prepaid Advertising Costs
Promotions Expense- Print Materials 2,840.00
Promotions Expense-Ribbon Cutting 9,050.00
Total Prepaid Advertising Costs 11,890.00
Initial Working Capital
Current Assets
Cash on hand 100,000.00
Supplies 18,481.15
Materials Payment 23,768.79
Prepaid Rent 87,920.00
Salaries and Wages 382,594.80
Total Initial Working Capital 612,764.74
TOTAL PROJECT COST 2,993,034.21

EBIT-EPS Analysis (see Exhibit 2)

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Capital is comprised of equity capital and debt capital. Although research
suggests that there is an optimal capital structure for every business, there is still no
specific scientific methodology to obtain that. One approach to determine the optimal
capital structure is the EBIT-EPS approach. It is often stated that the goal of the
management is to maximize owner’s wealth. The EBIT-EPS approach puts emphasis
on the firm’s profits before income and taxes. The EBIT-EPS approach allows for the
use of different options to choose the one that yields the highest EPS is chosen.

From the EBIT-EPS table, there are five options, each with increasing
percentage of debt. The EBIT is the average figure for the first five years of
operations. The table shows declining earnings before taxes figure because of the
higher level of debt as a leverage. Also, the net income decreases because of tax
expenses and the income taxes decline. The EPS grows with higher debt. One reason
is that interest payments can be deducted from taxable income. Thus, Magnum, Inc.
chose to utilize option 5 as the optimal capital mix with 70% debt and 30% equity,
which yields the highest earnings-per-share among the five options.

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EXHIBIT 2
EBIT-EPS ANALYSIS

Ma gnumInc.
EBIT-EPS Analysis
Total project cost 2,993,034.21
Average EBIT 1,666,414.70
Income Taxes 0.32
cost of debt (LT loan) 0.16
Common Shares at P10 par value
par value 10.00

Capital Mix Options

option 1 option 2 option 3 option 4 option 5
percentage of debt 0% 25% 50% 60% 70%
percentage of equity 100% 75% 50% 40% 30%

EBIT 1,666,414.70 1,666,414.70 1,666,414.70 1,666,414.70 1,666,414.70

Interest (16%) - 119,721.37 239,442.74 287,331.28 335,219.83
Earnings before taxes 1,666,414.70 1,546,693.33 1,426,971.96 1,379,083.42 1,331,194.87
Income taxes 533,252.70 494,941.87 456,631.03 441,306.69 425,982.36
Net income 1,133,162.00 1,051,751.47 970,340.94 937,776.72 905,212.51
Common Shares at P10 par value 299,303 224,478 149,652 119,721 89,791
EPS 3.79 4.69 6.48 7.83 10.08

Assumptions for Financial Projections

Rates

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Growth rate
The group will assume an annual 5 percent growth rate on sales.

Corporate income tax rate

Income tax is set at a constant rate of 32 percent1.

Cost of debt
For the purpose of this study, we used the following formula to get the cost of
debt:

Cost of debt = (banks’ average lending rate for all maturities2 +

premium3) x (1 – tax rate)
= (17% + 10%) x (1 – 32%)
= 18%

The premium used to adjust the cost of debt is 10% as allowance for the risk
associated with debt financing for a start-up business.

Cost of equity
The group used the following formula to determine the cost of equity:

Cost of Equity = Cost of Debt + Risk-free Rate

= 18% + 7%
= 25%

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The cost of equity is estimated to be higher than the cost of debt due to the
increased required return desired by investors. As such, to determine the cost of
equity, risk-free rate is added to the after-tax cost of debt. Risk-free rate is found by
averaging the 90-day T-bill rates for the past five years (2001-2005).4

Cost of Capital
The cost of capital is computed through the weighted average of the firm’s
debt and equity capital costs, using the optimal capital structure of 70% debt and 25%
equity. The weighted average cost of capital is computed as follows:

WACC = 70% (cost of debt) + 30% (cost of equity)

= 70% (18%) + 30% (25%)
= 20%
Inflation rate
For selected items in the financial statements, the projected national inflation
rate of 7.5%5 is used; the inflation rate of the clothing industry, pegged at 1.02% is
also used.

Dividend policies
Dividends amounting to P100, 000 is distributed to stockholders starting from
the 6th up to the 10th year of operations as income is seen to be at a considerably
favorable level.

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Projected Financial Statements

A. Income Statement Accounts (see Appendix 1 for the Pro-forma Income

Statements)
1. Sales

The selling price of the W.I.T t-shirts was determined through the survey
conducted. The pre-determined regular selling price of Php 350.00 per shirt will
remain constant throughout the ten-year projection. The discount price (50% of
regular price) of Php 175 shall also be kept constant.
Net sales is computed by dividing Gross Sales by 1.12 (at 12% VAT rate)

2. Sales Forecast (see Appendix 11 )

The sales forecast is based on the estimated production capacity that W.I.T has,
the percentage of which was shown in the Market Study. The percentage of the
effective demand that will be targeted will be kept at a constant rate.
Magnum estimates that 30% of the items offered for sale at regular price will
be sold. The remaining unsold items shall be offered for sale throughout the year at a
50% discount. It is estimated that 60% of these will be sold within the year.

Unsold items will be passed on to the following year and will be included in
the items to be offered for discount sale for that year.

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All sales are made on cash basis. It is also assumed that there will be no sales
returns.

3. Cost of Goods Sold (see Exhibit 12)

The Product Costing Schedule (see Exhibit 13) shows the computation of each
unit of t-shirt produced. The direct material cost component of each unit has been
adjusted for inflation for the ten-year projection.

The cost of goods sold for the promotional discount sale shall be based on
First in First out (FIFO) basis. Wherein, the unsold items from the previous year will
first be exhausted before the unsold items from regular sales of the present year.

4. Advertising Expenses

Advertising expenses will be set at 2% of gross sales annually. This amount

will be allocated to the various promotional activities that Magnum plans to
implement annually.

5. Depreciation Expense (see Exhibit 5)

In order to compute the depreciation expense, the straight-line method was

used. All fixed assets have a salvage value equal to zero.

The estimated useful life of the fixed assets are based on information provided
on-line sources, vendors of the corresponding fixed assets and from the estimation of
Soledad Silverio-Reyes, a Certified Public Accountant.

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6. Repair & Maintenance

Annual Repair and Maintenance cost shall be set at PhP15, 000 for plant and
PhP 10,000 for both store and office annually. This assumption was approved as by
Soledad Silverio-Reyes, a Certified Public Accountant, based on the analysis she
made on the nature and estimated life of the fixed assets.

7. Rent Expense (see Exhibit 9)

This cost will only include the rental fees charged by the mall to its tenants.
The ten-year projections were adjusted to reflect the national economy’s inflation
(pegged at 7.5%). This amount does not cover the 3% of gross sales component.

8. Administrative Expense (see Exhibit 6)

Position in the company and the level of responsibilities that each job entails
make salaries and wages vary from one employee to another. Employees are paid
every 15th and 30th of the month.

Magnum will give 3% increase every 2 years on the basic pay of all its
employees. These salary increases are meant to offset the effects of increases in the
inflation rate.

9. SSS Contribution (see Exhibit 6)

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Magnum will pay SSS contributions for its employees, contribution will vary
depending on the salary bracket that each employee belongs to.

10. PhilHealth Contribution (see Exhibit 6 )

As mandated by law, Magnum Inc. will give PhilHealth benefits to its

employees and his/her legal dependents to cover part of hospitalization cost and other
medical expenses. The company’s contribution for each employee is based on Phil
Health Premium Rates.

11. Employee Benefits (see Exhibit 6)

As mandated by P.D 851, employees shall be entitled to receive 13 th
month pay which should amount to not less than 1/12 of the total basic salary he/she
receives within a calendar year provided he/she has already worked in the company
for at least one month. The 13th month pay of all Magnum employees will amount to
the same monthly salary they receive.

12. Utilities Expense (Exhibit 10)

Expenses for utilities consist of total costs incurred annually for gasoline,
telephone, and electricity usage in the plant and office.

13. Supplies Expense(see Appendix 8)

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The items under this account consist of office supplies such as paper, pens, ink
and cleaning materials for the office, plant and stores.

14. Miscellaneous Expense (see Appendix 7)

Annual miscellaneous expense will consist of fees paid for renewal of legal
permits from the local government and other regulatory agencies.

15. Amortization Expense

This is the amortization of the organizational cost incurred before the start of
operations. The organizational cost is amortized over five years.

B. BALANCE SHEET ACCOUNTS

Current Assets
1. Inventory
The cost of ending inventory for the each succeeding years shall consist
of unsold items from the previous year and purchases made for materials for the
beginning of the next year. The purchase of materials at the end of the year will be
good for 250 units and will be held constant for the ten-year projection.

2. Supplies on Hand. (See Appendix 8)

3. Prepaid Expense.

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At the pre-operation period, prepaid expense refers to the payments made for
promotional materials, salaries and rent. There will no longer be pre-payments at the
succeeding years because raw materials and other inputs to production will be paid as
they are picked up from the suppliers.

Fixed Assets

4. Office Assets

Office assets include 4-in-1 office machine, personal computer, fire

extinguishers; furniture and fixtures such as chairs and tables, and filing cabinets.

5. Store Assets

Store assets include point-of-sale system (cash register), display materials,

mannequins, lighting system, and fire extinguishers. Leasehold improvements
accounts for the construction and renovation of the store.

6. Plant and Plant Assets

These include plant equipments for printing such as the manual press, UV
exposure units, paint curing machine, plant improvements, tables, cabinets etc. The
current market value of the plant building is also included in this account.

7. Vehicle

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Magnum will use a light commercial van for delivery. The market value of the
said vehicle at the time of acquisition is quoted at 800,000 and has 7 years remaining
usable life and it will be depreciated using the straight-line method.

8. Intangibles

The cost of leasehold improvements is listed under these Leasehold

improvements accounts for the renovation of the store. This will also be depreciated
over its estimated useful life.

9. Other Assets

Registration and legal certifications acquired during the start of the project
are placed under this account. The amount is amortized over a 5-year period.

Current Liabilities

1. Rent Payable

The store rent for the last month of the year shall be paid at the beginning of
the next year.

2. Utilities Payable

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The amounts under this account at year end shall carry the rent for the last
month.

3. Interest Payable

The interest at year end for the first five years of projection amounts to the
monthly interest payment of the annual 16% interest on the loan principal of
2,095,123.95.

4. VAT Output Tax Payable

This account, at year-end consists of the output tax for the last month of the
year.
5. Long-term Loan

The principal amount of the loan is 2,095,123.95, which will compose 70% of
the project’s financing. The interest rate is 16% per annum and the maturity is set at
Year 5.

Stockholder’s Equity

Capital Stock
Total capital stock is equals to Php 900,000 with P10 par value per share.

Sources of Financing

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It seems that Magnum, Inc., will have a difficult time finding a bank that provides
a loan for a start-up business like W.I.T. hence we deem it necessary for us to have a
guarantor to help with our loan needs. Magnum is indeed very fortunate to have two
guarantors to support our business venture. (Lifted from the Project Sponsors page)

1. Glenda C. Mercado
Underwriter, Sunlife of Canada Philippines, Inc.

Mrs. Mercado, a Certified Public Accountant, retired from being a financial officer in
Eastern Telecoms six years ago and then decided to join Sunlife of Canada as an
underwriter.

2. Pilar Crisostomo

Working as a loan officer in a prominent local bank for almost 15 years, Pilar
Crisostomo has had a lot of experiences in financial operations and management.
Besides her job in the bank, she is also an entrepreneur herself, managing two bars
in Makati and in Ortigas and a chain of neighborhood bakeries in Las Pinas and
Paranaque.

As such, Magnum can now loan a total of Php 2,095,124 at 16%1. To diversify the
risk, Magnum has decided to divide the total amount and then loan from two different
banks. Moreover, the two million worth of loan is too big for one bank to loan,
therefore it is better to loan a portion of it in one bank, and the other part in a different
one.

NPV Computation

1
BPI’s interest rate. Interest rate may change depending on the bank of choice.

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The net present value is computed by subtracting the initial project cost from the
present value of the operating cash flows for years 1 to 10, discounted at the
company’s cost of capital of 20%. The year-end operating cash flows are computed as
provided by the cash flow provided from operating activities as indicated by the
Statement of Cash Flows.

Net Present Value computed for the operating cash flows for years 1 to 10,
P1,491,273.39 , is found to be positive and greater than zero. As such, it is determined
that the company would earn a return greater than 20%, communicating an attractive
market value to the investors and increased wealth for the owners.

IRR Computation

The Internal Rate of Return is the discount rate that equates the NPV of an
investment opportunity with $0 because the present value of cash inflows equals the
project cost or initial investment. The Internal Rate of Return computed for Magnum,
Inc. is 29%. This is the compound annual rate of return that Magnum, Inc. will earn if
it invests in the business and receives the given cash inflows. Since the IRR of 29% is
greater than the cost of capital of 20%, Magnum, Incorporated’s business seems to be
acceptable.

Payback Period

The payback period is computed to determine the amount of time required for
Magnum, Inc. to recover its initial investment in the business, as calculated from the

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cash inflows from operating activities indicated by the Statement of Cash Flows. The
yearly cash inflows are accumulated until the initial investment is recovered.
Magnum, Inc.’s payback period is 4.56 years.

Financial Ratio Analysis

The information contained in the four basic financial statements (Balance Sheet,
Income Statement, Statement of Retained Earnings, and Statement of Cash Flows) is
important to many interested parties who regularly need to have relative measures of
Magnum, Inc.’s operating efficiency. Conducting a ratio analysis involves methods of
calculating and interpreting financial ratios to analyze and monitor Magnum, Inc.’s
performance.

Liquidity Ratios

Liquidity ratios measure the ability of a company to pay short term liabilities.
This includes the current ratio and quick ratio

Current Ratio. The current ratio measures Magnum, Inc.’s ability to meet its short term
obligations. It is computed as follows:

Current Ratio= Current Assets

Current Liabilities

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Generally, the higher the current ratio, the more liquid a firm is deemed to be. As for
Magnum, Inc., its current ratio has been increasing throughout the years, thus enabling it
to become more liquid in the long run.

Quick Ratio. The Quick Ratio is sometimes called the "acid-test" ratio and is one of the
best measures of liquidity. It is figured as shown below:

Quick Ratio = Current Assets- Inventory

Current Liabilities

The Quick Ratio is a much more exacting measure than the Current Ratio. By excluding
inventories, it concentrates on the really liquid assets, with value that is fairly certain.
Magnum, Inc.’s quick ratios are fairly low in years 1, 3, 5, and 7 because of high levels of
inventory during those years. In addition, the high variance between the current ratio and
quick ratio of Magnum is caused by high inventory asset balances in the balance sheet.

Activity Ratios

Activity ratios measure the speed with which accounts are transformed into sales
or cash. Regarding current accounts, measures of liquidity are not enough because
differences in the structure of a company’s current assets and current liabilities can
considerably affect its “true” liquidity.

Inventory Turnover. Inventory turnover measures the number of times that inventory is
replaced during the period. It can be computed as follows:

Inventory Turnover= Cost of Goods Sold

Average Inventory

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Magnum, Inc.’s inventory turnover increases to a great extent through the its operating
years. This means that Magnum, Inc. is transforming its inventory into sales faster. This
is acceptable considering the nature of the company’s business which involves products
(clothes) that are highly affected by changes in fads or styles and other clothing materials.

Total Asset Turnover. The asset turnover is used to measure the ability of the firm to use
its assets efficiently by turning it into cash. The computation for this ratio is:

Total Asset Turnover= _____Sales________

Average Total Assets

Magnum, Inc.’s total Asset Turnover has been increasing from Year 1 until Year 5.
However, it shows a decline from Year 5 until year 10. Though this may be the case, the
changes in this ratio from year-to-year are not that critical.

Debt Ratios

Debt ratios indicate the company’s ability to pay its debts. This is somewhat
similar to liquidity except that solvency involves longer time periods. Long-term
creditors and stockholders are particularly interested in these ratios. The debt position of
a company also indicates the amount of other people’s money being used to generate
profits.

Debt Ratio. The debt ratio measures the proportion of total assets financed by Magnum,
Inc’s creditors. The higher this ratio, the greater the amount of other people’s money
being used to generate income. This ratio can be computed as follows:

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Debt Ratio = Total Liabilities

Total Assets

Magnum’s Debt Ratio experiences a significant decrease in Year 5 onwards because it no

longer pays interest on the money it loaned. Therefore, Magnum, Inc. has a lesser degree
of financial indebtedness and less financial leverage.

Profitability Ratios

Profitability ratios help people analyze the firm’s profits. The firm is very
much concerned with earning enough revenue that can satisfy its obligations and at
the same time provide a satisfactory return on its stockholder’s investments.

Gross Profit Margin. The gross profit margin measures the firm’s mark up on its
products. It can be gauged by the following formula:

Gross Profit Margin= Gross Income

Sales

The relatively stable and consistent figures in Magnum, Inc.’s Gross Profit
Margin is a good sign that the company is maintaining a stable gross profit . This also
shows that there is no significant change in the company’s pricing policies.

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Operating Profit Margin. The operating margin represents the pure profits that are
left to the company. This can be determined by the formula below:

Operating Profit Margin= Operating Income

Sales

The Operating Profit Margin in Year 2 is significantly low compared with the other
years due to a lower gross income matched with increasing operating expenses. Other
than this figure, the ratio has been increasing for Magnum, Incorporated.

Net Profit Margin. The return on net sales measure the income provided by sales. It
can be measured by computing this formula:

Net Profit Margin= Net Income

Sales

The Net Profit Margin for Magnum, Inc. has been increasing save for Years 2 and 3.
The low net profit margins on these years were due to lower gross income matched
with increasing operating expenses. However, net profit shoots up after Year 3.

Earnings per Share. EPS measures the return earned on each outstanding share. It
can be determined by computing the formula below:

EPS= Earnings Available for Common Stockholders

Number of Shares of Common Stock Outstanding

The growing figure will definitely appeal the investors. The book value per share is
increasing at a fast pace which indicates the attractiveness of the stocks to its owners

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Return on Assets. The ROA measures the firm’s ability to use its assets effectively in
generating profits. The formula for this is:

Return on Assets= Earnings Available for Common Stockholders

Total Assets

The ROA for Magnum, Inc. is low in Year 2. However, it has increased the following
years and remained relatively consistent over Years 5 to 10.

Return on Equity. ROE measures the returns earned on each peso of common
stockholder’s investment. The evaluation of ROE can be measured by:

Return on Equity= Earnings Available for Common Stockholders

Common Stock Equity

Magnum, Inc. will experience a growing ROE meaning the owners are better off. The
increasing trend (with the exception of Year 2) also shows how well the company is
utilizing the investment contributed by its owners.

Sensitivity Analysis

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A sensitivity analysis is one approach for assessing risk that uses several possible
return estimates to obtain a sense of the variability among outcomes. One common
method involves making pessimistic and optimistic estimates of the returns associated
with the business.

The pessimistic scenario included here is a 20% unmet target revenue. There is a
negative Net Income outcome for Years 1 to 4. The Retained Earnings balance shows
negative amounts for Years 1 to 5 as well. Cash Provided by Operating Activities are
negative during Years 1 and 3, and Ending Cash Balances are negative for Years 3 and
5. The Net Present Value computed for the pessimistic scenario resulted to have a
negative amount. Its Internal Rate of Return is only 15%, much less than the 20% cost
of capital for Magnum, Incorporated. The Payback Period took 6.24 years to gain the
return on its project cost. This indicates that in the pessimistic scenario, Magnum,
Incorporated’s investment in the business will not be favorable or acceptable.

As for the optimistic scenario of a 20% increase in its gross revenue, resulting
amounts were all positive. The Net Present Value of P15,270,912.94 is positive and
very high in this case. Its 71% Internal Rate of Return is also significantly higher than
its 20% cost of capital, and the investment on the project (Payback Period) can be
recovered in only 2.12 years.

ENDNOTES

26
1
In General – Except as otherwise provided in this code, a corporation organized, authorized, or existing under the laws of
any foreign country, engaged in trade or business within the Philippines, shall be subject to an income tax equivalent to
thirty-five percent (35%) of the taxable income derived in the preceding taxable year from all sources within the
Philippines: Provided, That effective January 1, 1998, the rate of income tax shall be thirty-four percent (34%); effective
January 1, 1999, the rate shall be thirty-three percent (33%) and effective January 1, 2000 and thereafter, the rate shall be
thirty-two percent (32%).

- Section 28, paragraphs (A)(4) of the National Internal Revenue Code

http://www.chanrobles.com/republicactno9294.html

2
http://www.bsp.gov.ph/statistics/sefi/sefip2.htm

3
http://www.bsp.gov.ph/statistics/sefi/sefip2.htm

20012002200320042005T-bill rate (91 days)9.86%5.43%6.03%7.34%6.45%

5
“Economic Statistics.” [Online] Available
http://www.philippinebusiness.com.ph/economic_stats/economy.htm, August 2005