Once you have completed your PP&E analysis, you can work on your capitalized setup costs. And this is just another base calculation where the beginning balance equals last year's ending balance.

We're gonna add here our capitalized interest as well as other setup costs.

The numbers we can take from our calculations at the very top. So here we have our other setup cost spend, and to that number we're gonna add the interest expense, which at the moment is blank. But later on when we work on the debt schedule, we're gonna have a number for interest expense. Amortization expense. we're gonna skip this line since we only amortize our capitalized costs during the operational phase. So for now, we can simply take the sum of all three lines to get our ending balance for capitalized costs. Now let's go ahead and take all lines and copy them until year three, only during the construction phase.

During the operational phase, we're gonna begin with a balance of 60.

We are not gonna capitalize the interest nor any setup costs any longer. Instead, we're gonna be amortizing our capitalized costs.

So we're gonna take the 60 balance, we're gonna lock that in, and we're gonna divide this by our assumption of the amortization life, which is three years, and we lock that in. Now before we can copy this to the right, we have to make a couple of modifications to the formula. The first one is we have to make the the number negative. And the second one is that we have to ensure that we don't over amortize our capitalized costs. So we're gonna use a MIN function where we take the minimum of the amortization expense and the beginning balance for that year.

Now we can go ahead and sum up the values and that gives us an ending net capitalized costs of 40 in year four. We can take all four lines and copy them to the right all the way through year eight. And as you can see, by the time we reach year six, we have fully amortized our capitalized costs. So let's move on to our income statement forecast. We're gonna be building our income statement only for the operational phase, starting with revenue. We have an assumption of revenue at the very top. So let's link to that assumption and that's gonna be 100.

Our operating costs are gonna be estimated as a percentage of revenue. So let's take the assumption of 70% of revenue and multiply times our revenue amount of 100. Our depreciation was already computed in the PP&E base calculation, and that's gonna be negative 15. And the amortization is the number we just calculated, and that's negative 20. If we add these numbers, we get our EBIT of negative 5. Now the next line item is our interest expense, but we don't yet have a forecast of interest expense until we work on our debt schedule. So for now, we're gonna leave this line blank, but we can still compute our profit before tax by taking our EBIT and adding our interest expense, which of course will be a negative number.

Next, we need to estimate our tax expense. So we are given an assumption of a tax rate of 35% in our operating assumption section. There you go. We're gonna multiply these times our profit before tax, and that gives us a tax expense of 1.8, which in this case looks like it is a tax credit because at this point the project is loss making. Finally, to compute the net income, we take the profit before tax and we add the tax expense to give us negative 3.3. Now we can take all of our income statement line items and copy them to the right until year eight.