A. Financial Assumptions
1. Prices of raw materials are based on 2014 level as follows:
Sweet red onions P 1,300/sack
Red pepper P 1,300/sack
Flour P 950.00/sack
Conch P 200.00/pail
Egg P 180.00/tray
Cooking oil P 250.00/gal
Pizza sauce P 149.50/gal
Cheese P 40.00/box
Hotdog P 23.00/pack
Powder Yeast P 35.00/kilo
2. Ending Inventory is assumed to be zero
3. Repair and maintenance would be 3% of the total cost of machinery and equipment
4. Depreciation method used is straight line
5. Property tax of building is 24%, machinery and equipment is 1% and vehicle is 4%. The ...view middle of the document...
20 | 117,121.80 | 195,203 |
4 | Vehicle | 56,000 | 84,000 | 140,000 |
5 | Working capital | 6,429,825,696 | 9,644,888.54 | 16,074,814.24 |
6 | Contingency cost | 21,408.12 | 32,112.18 | 53,520.30 |
Total | | 6,666,535.02 | 9,999,802.52 | 16,666,337.54 |
C. Source of Financing
The 60% or P 9,999,802.524 of the total project will be loaned from Greenbank at 8% interest payable in 5 years consisting of principal and interest payment.
Table 13. Amortization Schedule
End of the year | Loan Payment | Beginning of the year Principal | Interest Payment | Principal Payment | End of the year Principal |
1 | 4,396,290.57 | 16,666,633.75 | 1,333,330.70 | 3,062,959.87 | 13,603,673.88 |
2 | 4,396,290.57 | 15,270,337.26 | 1,221,626.98 | 3,174,663.59 | 12,095,673.67 |
3 | 4,396,290.57 | 12,401,080.42 | 992,086.43 | 3,404,204.13 | 8,996,876.29 |
4 | 4,396,290.57 | 7,631,173.50 | 610,493.88 | 3,785,796.69 | 3,845,376.81 |
5 | 4,396,290.57 | 3,998,000.28 | 319,840.02 | 4,076,450.54 | -78,450.26 |
D. Financial Projections and Analysis
A financial projection and analysis is simply forecasting your sales and revenue. This information is important since it is a key indicator to repay a loan.
The different items to include in projections are; sales revenue estimates, administrative costs, production costs, sales costs, capital expenditures, gross margin by product line, sales increase by product line, interest rates on debts, income tax rate, accounts receivable collection plan, accounts payable schedule, inventory turnover, depreciation schedules, and the usefulness or depreciation of assets. There are 14 different items to include and fully support in your financial projections. With these different items it is best to give a month-by-month breakdown for the first year, a quarterly breakdown for the next two years, and an annual breakdown for the final two years you are projecting.
Financial projections has its purpose to show what the company is capable of realizing in revenues and profits. This are also used to develop a series of analysis that help make economic and financial judgements about the company’s potential - payback period, Net Present Value (NPV) and Internal Rate of Return (IRR).
Payback period helps the company see the time required for the firm to recover its initial investment. Payback period must be shorter than the project life. Net Present Value will determine the worthiness of the time value of investment. NPV is acceptable when it is greater than zero (0) or positive. Internal Rate of Return measures the investors’ compensation for risk that they bear with the investment. IRR must be higher than the cost of capital. Because of temporal effect on company’s succes, it is important to conduct projections over a reasonable time frame. In this study, it covers five years.
E. Sensitivity Analysis
Sensitivity analysis is used to examine the profitability under high cost circumstances, as well as...