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Coffee Shop

The document outlines a financial modeling course for a coffee shop business, detailing assumptions regarding sales, costs, and financing over a 10-year horizon starting in 2020. It includes sales projections, cost breakdowns, and general assumptions about expenses, staffing, and financing structure. Additionally, it discusses scenario and sensitivity analyses to assess potential financial outcomes.

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30 views3 pages

Coffee Shop

The document outlines a financial modeling course for a coffee shop business, detailing assumptions regarding sales, costs, and financing over a 10-year horizon starting in 2020. It includes sales projections, cost breakdowns, and general assumptions about expenses, staffing, and financing structure. Additionally, it discusses scenario and sensitivity analyses to assess potential financial outcomes.

Uploaded by

Captain X
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Financial Modeling Course

Coffee Shop

Page 1
Coffee Shop
This is a business of coffee shop, where you will be operating a coffee shop
in a reputable locality attracting large range of customers. On the basis of
available market response from competitor’s business you need to assess the
investment appraisal decision regarding startup of this new business of your
client.

General Assumptions
— Business horizon is of 10 years, starting from 2020.
— Amounts are expressed in PKR.
— Inflation of 6% is assumed in all heads of expenses & 7% in revenues.

Sales assumptions
— Average sale of 1200 cups per day during first two years of startup, which
isexpected to grow to 1700 cups year three and onwards.
— 40% sale of large cups and 60% sale of small cups.
— Price per large cup USD 4, small cup USD 3.

Cost assumptions
— Coffee beans cost per cup is USD 1.50 (assume it raw material)
— Beating and further processing cost is USD 0.50. (Processing cost)
— Coffee beans would be imported for order of 170 cups per day starting from first
year of operations, excess stock would be transferred to closing stock
— Monthly utilities (Electricity USD 5,000 & water & heating USD 2,000).
— 3 persons will be employed @ USD 1,800 each with annual increment of 10%.
— Tax @ 20%
— Assume an initial marketing expense (e.g., USD 3,000 in year one) to promote
the coffee shop, with a 5% annual increase.
— Assumption for Account receivables are 36 days and for account payable days
are 72 days.

Page 2
General assumptions
— Shop for rent is available in surrounding at monthly rent of USD12,000 which is
expected to increase by 5% each year. Initial security of shop is USD 5,000.
— 50% of the project will be equity financed and 50% is loan financed.(Loan
payment will arrears, Interest rate 10% )
— PPE costs include following:
— Blending machine USD 120,000
— Heating unit USD 100,000
— Processing machine USD130,000
— Payment will be on two annual installments.
— Useful life is 10 years.

Scenario analysis
Best case expenses 5% & revenue by 5%
Base case No change
Worst case Revenue 5% & expense by 5%.

Sensitivity analysis:
WACC or Terminal growth rate should be used for sensitivity analysis.

Financial Model Tools:


Discounted Cash Flows.

Page 3

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