THE HEXAGON: A FEASIBILITY STUDY

Leader: FRANZ A. GALAMGAM Members: SHIELA MAY O. COSTALES MYLENE F. SOBREMONTE DIANA JANE C. SUMERA DIANA ROSE R. AREOLA ARIANE A. ESTRADA

URDANETA CITY UNIVERSITY Urdaneta City, Pangasinan March 2013

URDANETA CITY UNIVERSITY San Vicente West, Urdaneta City 2428 Pangasinan, Philippines

Vision, Mission and Goal of URDANETA CITY UNIVERSITY

Vision A transformative, self-reliant and dynamic university recognized as center of excellence with globally competitive professionals and distinctive capabilities in research, extension, and production.

Mission The University shall provide advanced instructions in the field of arts, sciences, teacher education, technical and entrepreneurship and establish a strong research culture with active involvement in extension and production activities.

Goal The University aims to contribute to the attainment of national development goals through character building, academic excellence, promotion and enrichment of the Filipino historical and cultural heritage and preservation of environment.

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URDANETA CITY UNIVERSITY COLLEGE OF ACCOUNTANCY AND BUSINESS ADMINISTRATION

Vision, Mission and Goal of COLLEGE OF BUSINESS ADMINISTRATION

Vision The College of Business Administration envisions to become the center of development of business students and is committed to provide quality education attuned to meet the recent trends and demands of global competitiveness.

Mission To provide quality training for future entrepreneurs through adequate exposure to the actual business world so that they will be equipped with the acumen for efficient management through its business oriented programs.

Goal The College Business Administration aims to produce quality and competent graduates who could easily find a job or be absorbed in the mainstream of the labor oriented sector and who have the capacity to grow and deal effectively with problems they will face as future economic manager.

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The Hexagon
Alex Gacutan Bldg. Alexander St., Urdaneta City Pangasinan

Vision, Mission and Goal of The Hexagon

Mission The Credit Institution aims to grant loans with a low interest rate and a longer term of payment and will serve as a bridge to make its borrowers dreams a reality.

Vision The Hexagon envisions to be recognized as one of the finest and most responsive credit institution that financially innovate and educate needy people and organizations that initiatively strive to improve their standard of living.

Goal To participate effectively in social and economic development of the communities we serve and aim not only to help people in their financial needs but also to provide financial literacy in proper handling of finances.

The Proposed Logo of The Hexagon

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TABLE OF CONTENTS Page Vision, Mission and Goal of Urdaneta City University Vision, Mission and Goal of College of Business Administration Vision, Mission and Goal of The Hexagon Logo of The Hexagon List of Tables List of Figures Acknowledgement Dedication Executive Summary CHAPTER 1 THE PROBLEM AND ITS BACKGROUND Rationale Brief History of Lending Brief History of Urdaneta City Statement of the Problem Significance of the Study Definition of Terms 2 ORGANIZATIONAL AND MANAGEMENT ASPECT Type of Business Organization Organizational Structure Qualification, Duties, and Function of Management Staff Basic Salary and Mandatory Benefits Companys Policies vii 1 1 2 4 6 6 7 9 9 10 12 14 16 iii iv v vi xi xii xiii xv xvi

3 MARKET ASPECTS Service Description Quantification of Supply Quantification of Demand Quantification of Target Markets Price Study as Part of The Hexagons Competitive Advantage Service Strategy Place Strategy Promotion Strategy Strategies on the Collection of Loans 4 TECHNICAL ASPECT Business Location Equipment Furniture and Fixtures Layout and Structural Design Business Operation Recording of Transactions 5 FINANCIAL ASPECT Total Projected Cost Basic Assumptions Financial Statements Interpretation of Financial Ratio Analysis of Financial Ratios 6 FINANCING ASPECTS 7 SOCIO-ECONOMIC ASPECT 8 CONCLUSION AND RECOMMENDATION BIBLIOGRAPHY viii

19 19 20 20 21 22 23 24 24 25 28 28 32 33 37 38 39 39 40 44 50 51 53 54 55 56

APPENDICES A Letter Requesting Permission to Gather Data B Article of Proposed Partnership C Daily Minimum Wage Rates D Social Security System Employees Registration E Social Security System Contribution Schedule F PhilHealth Contribution Schedule G Application for Business/Mayors Permit H Mayors Permit I Department of Trade and Industry Certification J Bureau of Internal Revenue Application for Registration K Certificate of Location Clearance L PhilHealth Member Registration Form M Application Form of Credit Institution N Securities and Exchange Commission Registration O Supporting Computation: Interest Income P Supporting Computation: Loan Receivables Q Supporting Computation: Collections R Supporting Computation: Monthly Salaries Expense S Supporting Computation: 13th Month Pay T Supporting Computation: SSS and EC Contribution ix

58 59 60 62 64 65 66 67 68 69 70 71 72 73 77 78 81 83 86 89 90

U Supporting Computation: PhilHealth Expense V Supporting Computation Pag-ibig Fund Contribution Expense W Supporting Computation Gasoline Expense/ Advertising Expense X Supporting Computation of Office Supplies Y Supporting Computation Permit and Licenses Z Supporting Computation Insurance Expense AA Supporting Computation Utilities Expense AB Supporting Computation Trust Liabilities AC Supporting Computation PhilHealth Contributions Payable AD Supporting Computation Pag-ibig Fund Contribution Payable AE Supporting Computation Tax Payable AF Loan Application Requirements AG Loan Application Form AH Negotiable Promissory Note AI Chattel Mortgage PHOTO EXHIBITS CURRICULUM VITAE Areola, Diana Rose R. Costales, Shiela May O. Estrada, Ariane A. Galamgam, Franz A. Sobremonte, Mylene F. Sumera, Diana Jane C. x

93 96 98 99 100 101 102 103 104 105 106 107 108 109 111

LIST OF TABLES

Table 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Monthly Basic Salary and Benefits Total Number of Population and Households Comparative Analysis of Credit Institutions Equipment Furniture and Fixtures Total Projected Cost Five Year Assumption for Revenue Projected Income Statement Net Income Distribution Projected Statement of Changes in Partners Equity Projected Statement of Cash Flows Projected Balance Sheet Financial Ratios Capital Contribution of Partners

Page 15 21 24 32 33 40 41 45 46 47 48 49 52 53

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LIST OF FIGURES Figure 1 2 3 4 5 6 7 8 Organizational Chart of the Proposed Business Vicinity Map of Pangasinan Vicinity Map of Urdaneta City Detailed Map of The Hexagon Proposed Location of The Hexagon Proposed Floor Plan of The Hexagon Front and Rear Elevation of The Hexagon Flow Chart of Loan Application Processing Page 11 27 29 30 31 34 35 36

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ACKNOWLEDGEMENT The researchers would like to thank and acknowledge the individuals who inspired, helped and assisted us for the accomplishment of this Feasibility Study. Its successful completion could not have been possible without the helping hands of the following people: Remedios A. Palaganas, CPA, MBA, the Dean of the College of Accountancy and Business Administration, for her wholehearted assistance and concern for the welfare of the researchers; Mr. Lindbergh Lendl S. Soriano, CPA, member of the panel of evaluators, for their intellectual inputs, comments, and constructive suggestions; Mrs. Elisa C. Cristobal, MBA, our Feasibility Study Adviser, for her brilliant ideas and for all undying encouragements, valuable motivations, and for giving her motherly and all out support for the improvement of the study; Mr. Felipe M. Estrada, CPA, our financial analyst, his patience to guide us, for his comments and valuable suggestions. Miss Gemma Marie Baltazar, our Critic Reader, for sharing her time to give brilliant ideas and suggestions for the improvement of the study; DBA, Dr. Arly N. Visperas, for sharing his knowledge, suggestions and constructive comments; The owner of High Value Lenders, for letting the researchers gather data and entrusting information regarding the nature of the business. To our parents and relatives, for giving their immeasurable and indispensable financial, moral, and spiritual supports they had for the completion of this study; xiii

To their friends, BSBA Financial Management III, and special people, we thank you for sharing your invaluable thoughts and recommendation relative to this study, for those care, which means that the fire of our friendship will always remain ignited in our hearts; To chachoterz for the laughter and crazy moments which serves as a relief during hard times and everyone seems forgotten how to smile in the middle of this study. And to God Almighty for all the blessings and guidance, and for giving us strengths and keeping us safe wherever this study may lead us most of all, for all His infinite love blessings, we give back all the glory, honor, thanksgiving and adoration.

The researchers Franz Ara Mylez DJ Shiela Diana

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DEDICATION The researchers heartily dedicate this Feasibility Study to people they know best and they love most. Mr.&Mrs. Rogelio R. Galamgam Mr.&Mrs. Jaime C. Estrada Mr.&Mrs. Eddie A. Sobremonte Sr. Mr.&Mrs.Roldan P. Sumera Mr.&Mrs. Fidel P. Costales Mr.&Mrs.Arnel C. Areola Their parents who raised them, who taught them to stand for every fall. They are the ones who guided their wings to fly. Other Instructors Brothers and Sisters Friends and Classmates It is made and brought to you humbly to offer their sincere thanks and remembrance, their lasting thoughts, their music and memories of their college days. And; To the Almighty Father, Who always shows His light For his bothered children

The Researchers Franz Ara Mylez DJ Shiela Diana

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EXECUTIVE SUMMARY Name of the Proposed Project The Hexagon Type of Business Organization Partnership Location of the Business Alex Gacutan Bldg. Alexander St., Urdaneta City, Pangasinan Proponents Franz A. Galamgam Ariane A. Estrada Mylene F. Sobremonte Diana Jane C. Sumera Shiela May O. Costales Diana Rose R. Areola Proposed Capital The proposed capital is Five Million Four Hundred Ninety Thousand Pesos(P 5,490,000) Brief Description of the Project The Hexagon shall grant loans to those people who are in need of fund to finance their daily needs and wants. Organizational and Management Aspect. Partnership is the best suited organizational set up for the proposed business consisting of six (6) general partners. The business will initially engage with the services of six (6) xvi

staff consisting of a General Manager, Cashier/Secretary, Bookkeeper, and three (3) Field collectors/Credit Investigator/Appraiser. Market Aspect. The Hexagon, the proposed project, can be classified as a credit institution. The Hexagon will be granting loans to those who are in needs of fund at ten percent (10%) interest rate and a payment period of 120 days at a daily basis. The amount of loan that shall be granted will be increasing yearly at the same interest rate and payment period. Technical Aspect. The establishment of The Hexagon is technically feasible. The project will be situated in Alex Gacutan Bldg. Alexander St. Urdaneta City, Pangasinan. A commercial space will be rented for six thousand pesos (P6,000) monthly. Office equipment shall be acquired as well as, furniture and fixtures with total cost of P5,484,064.35. The loan application process shall be as follows respectively: Financial Aspect . The Hexagon Net Income after tax are:P284,323.48; 861,840.81; 1,204,490.34; 1,630,109.82; 1,909,806.54 for the years 2015, 2016,2017,2018,2019 respectively. The net income shall be divided equally among partners. The Projected Statement of Changes in Partners Equity showed the ending capital balance as follows: Year 1 P5,617,945.57; Year 2 P6,005,773.94; Year 3 P6,547,794.6; Year 4 P7,281,344.02; Year 5 P8,140,756.97 . Projected Balance Sheet shows that total assets from year 1 to year 5 are: P5,723,190.71; P6,255,912.46; P6,883,467.49; P7,724,543.56; P8,654,613.21 respectively. Financing Aspect.Each partner shall contribute an amount of Nine Hundred Fifteen Thousand Pesos (915,000) to accumulate the total amount of

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P5, 490,000.00 as the initial capital needed for the operation of the proposed business. Socio-economic Aspect. The Hexagon can contribute to the revenue of the City of Urdaneta in terms of local tax remittances and by acquiring permits and licenses. In addition , it will provide employment to the residents of Urdaneta City. Furthermore, remittance of value added tax, income tax, ten percent (10%) withholding tax and taxes withheld from employees salaries to the Bureau of Internal Revenue (BIR) can contribute in the improvement of Philippine Economy. Conclusion and Recommendation. The conclusions derived from the different aspects of The Hexagon are as follows: 1) The Projected Income Statement shows that the proposed business is profitable. Net Income after deducting the ten percent (10%) final tax are: 2015 P 255,891.13; 2016 P 775,656.73; 2017 P1,084,041.31; 2018 P1,467,098.84; 2019 P1,718,825.89. 2) The HEXAGON can help to improve the economic status of the country by remitting value-added tax as follows: P118,134.72 2015; P233,307.36 2016; P302,243.04 2017; P375,582.24 2018; P433,334.88 2019. In addition, income tax remittances are P91,389.69; P307,483.49; P479,497.69; P653,016.42; P788,521.00 for 2015, 2016, 2017, 2018, and 2019 respectively. Furthermore, ten percent (10%) final withholding taxes on partners share in net income are as follows: 2015 P28,432.35; 2016 P86,184.08; 2017 P120,449.03; 2018 P163,010.98; 2019 P190,980.65.

3) The proposed business can initially employ 6 workers. This could lessen an unemployment rate problem in the city. Therefore, after a careful perusal of all the aspects of the study, the establishment of The Hexagon is highly feasible and is recommended to be establish the soonest time as possible.

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