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    Project Cost, Sources of Financing and Financial Assumptions

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    Mer Ks
    The document outlines the financial assumptions and projections for a new business over its first 5 years of operations. It details an initial capital investment of 1.3 million pesos and equipment purchases totaling over 400,000 pesos. Revenue is projected to increase annually by 4% from price increases and 10% from quantity increases. Expenses such as supplies, utilities, and salaries are also projected to increase at set rates each year. The document provides cost projections, depreciation schedules, and financial assumptions to model the business's profitability over 5 years.

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    Project Cost, Sources of Financing and Financial Assumptions

    Uploaded by

    Mer Ks
    28 views3 pages
    The document outlines the financial assumptions and projections for a new business over its first 5 years of operations. It details an initial capital investment of 1.3 million pesos and equipment purchases totaling over 400,000 pesos. Revenue is projected to increase annually by 4% from price increases and 10% from quantity increases. Expenses such as supplies, utilities, and salaries are also projected to increase at set rates each year. The document provides cost projections, depreciation schedules, and financial assumptions to model the business's profitability over 5 years.

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    Financial-projection-2 (1).docx

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    The document outlines the financial assumptions and projections for a new business over its first 5 years of operations. It details an initial capital investment of 1.3 million pesos and equipment purchases totaling over 400,000 pesos. Revenue is projected to increase annually by 4% from price increases and 10% from quantity increases. Expenses such as supplies, utilities, and salaries are also projected to increase at set rates each year. The document provides cost projections, depreciation schedules, and financial assumptions to model the business's profitability over 5 years.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    28 views3 pages

    Project Cost, Sources of Financing and Financial Assumptions

    Uploaded by

    Mer Ks
    The document outlines the financial assumptions and projections for a new business over its first 5 years of operations. It details an initial capital investment of 1.3 million pesos and equipment purchases totaling over 400,000 pesos. Revenue is projected to increase annually by 4% from price increases and 10% from quantity increases. Expenses such as supplies, utilities, and salaries are also projected to increase at set rates each year. The document provides cost projections, depreciation schedules, and financial assumptions to model the business's profitability over 5 years.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Chapter 8

    Project cost, sources of financing and financial assumptions

    1. The projected financial statements present the five (5) complete


    years of accounting periods.
    2. The business will follow calendar period of accounting starting from
    January 1 and will end on December 31.
    3. Initial capitalization to be contributed by the investors will amount
    to P1,300,000.00 at the inception of the business.
    4. From the total investment, funds amounting to P135,329.92,
    recorded as lease improvements, will be allocated for the
    construction materials and labor to be used for the renovation of the
    commercial space to be rented.
    5. Yearly rental will amount to P60,000.00 annually, or P5,000.00
    monthly, for the next five years and without escalation clause.
    6. The following are the details of the equipment which are expected to
    be purchased by the business for its operations:
    Equipment Acquisition Acquisition Useful life Salvage
    cost date value
    Laundry equipment P348,194.00 January 15 years Nil
    Kitchen and dining 22,213.75 January 3 years Nil
    equipment
    Office furniture and 48,236.50 January 3 years Nil
    fixtures
    Cleaning and emergency 7,515.59 January 3 years Nil
    equipment
    Leasehold improvement 135,329.92 January 15 years Nil
    Straight line method of depreciation will be used. No depreciation is
    being charged on the first year of the operations.
    7. Light and water expenses are projected to be P15,000.00 and
    P7,500.00 respectively for per quarter in first year. Increase of 3%
    per year based on original projection are expected for the succeeding
    years.
    8. Annual supplies expenses are projected to be P19,980 each for the
    next three years with annual increase of 5% per year based on the
    original projected cost starting on the second year.
    9. Advertising expense amounting to P2,340, and uniform amounting
    to P2,850 are expected to increase by 4% annually based on the
    annual projection.
    10. Permits and licenses P3,500 are expected to increase by 7%
    annually based on the original annual projection.
    11. Monthly retainer’s fee for the accountant will be P2,500.00 without
    incremental increase.
    12. The business will maintain petty cash of P5,000.00 retained under
    imprest system. Change fund will also be maintained amounting to
    P3,000.00. Revolving fund of P30,000.00 will be used to cover daily
    operations of the business.
    13. Sales are expected to increase by following percentage for the 5
    year-period:
    Year Price change Quantity change
    1
    2 4% 10%
    3 4% 10%
    4 4% 10%
    5 4% 10%
    14. Product costs are expected to increase as the same rate as the sales
    in terms of the quantity change while at 2% in terms of increase in
    the price.
    15. No trade receivables were expected to arise since the business
    payment mode is through cash only.
    16. Ending supplies and ending inventories are expected to be 3% of
    the total product cost annually.
    17. Trade and other payables are expected to be 1% of the total product
    costs annually.
    18. The owner is expected to withdraw from the capital amounting to
    30% for other personal and investment use.
    19. Regular employees will be hired to work in the business. Increase
    in the salary for the five-year period:
    Employee position PROJECTED INCREASE
    Year 1 Year 2 Year 3 Year 4 Year 5

    Manager 2% 2% 2% 2% 2%
    Barista 2% 2% 2% 2% 2%
    Laundry tenant 2% 2% 2% 2% 2%
    Delivery boy 2% 2% 2% 2% 2%
    Position Monthly Salary Deduction (SSS, Pag-ibig, phil health)
    Manager 10,400.00 1,083.00
    Barista 7,670.00 837.50
    Laundry tenant 7,670.00 837.50
    Delivery boy 7,670.00 837.50
    *Annual increase is based on the projected monthly compensation.

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