APA Style Format

Group Name:-

LEARNERS
Group Members:1. Shujaat Ali Nadeem
2. Raja KAmran Khan
3. Saif Ur Rehman

Submitted To:-

Sir.Adeel Javaid

W1F14MCOM0030
w1f14mcom0046
w1f14mcom0045

DEDICATION
To
our Dearest and most
respected Parents, whose efforts
and prayers are great source of strength to us.
Their love inspired us
to the higher idea of
life

ACKNOWLEDGEMENT
A

task undertaken without offering prayers to almighty ALLAH

and talking blessings from the elders is not a good beginning.

Likewise

the

work

completed

without

acknowledging

the

assistance to those who were always by our sides to make our

efforts fruitful in the task left incomplete.

Firstly,

we would like to thank ALLAH for his cordial and

merciful blessings which have enabled us to complete this project.

We

wish to extend our deepest regards and obligation to

Sir.

Adeel Javaid for their help and guidance in completing the project.

Contents
Introduction of Business No 01...................................................................................8
Capital Budgeting Process........................................................................................ 10

Generation of Idea:-........................................................................................ 10

Screening the Proposal................................................................................... 10

Evaluation of Proposal..................................................................................... 10

Selection of Investment:.................................................................................11

Implementation and monitor:.........................................................................11

Market Analysis........................................................................................................ 12
Market Size:.............................................................................................................. 12
Customer Analysis:................................................................................................... 13
Competition Analysis:............................................................................................... 13
Market Growth Rate.................................................................................................. 14
Market Profitability................................................................................................... 14
Industry Cost Structure............................................................................................. 14
Classification of Initial Cost....................................................................................... 15
Calculation of Cash Inflows....................................................................................... 19
Capital Budgeting Techniques:................................................................................. 19

Net Present Value............................................................................................ 19

Pay Back Period:.............................................................................................. 20

Discounted Pay Back Period............................................................................21

Profitability Index............................................................................................ 22

Accounting Rate of Return:............................................................................. 22

Internal Rate of Return.................................................................................... 22

Modified Internal Rate of Return.....................................................................23

Real Option:-............................................................................................................. 25
Risks......................................................................................................................... 26
Introduction.............................................................................................................. 28
Capital Budgeting Process........................................................................................ 29

Generation of Idea:-........................................................................................ 29

Screening the Proposal................................................................................... 29

Evaluation of Proposal..................................................................................... 29

Selection of Investment:.................................................................................30

Implementation and monitor:.........................................................................30

Market Analysis........................................................................................................ 31
Market Size:.............................................................................................................. 31
Customer Analysis:................................................................................................... 31
Competition Analysis:............................................................................................... 31
Market Growth Rate.................................................................................................. 31
Market Profitability................................................................................................... 32
Industry Cost Structure............................................................................................. 32
Initial Cash Outflow:.................................................................................................. 33
Calculation of Cash Inflows....................................................................................... 33
Capital Budgeting Techniques:................................................................................. 34

Net Present Value............................................................................................ 34

Pay Back Period:.............................................................................................. 35

Discounted Pay Back Period............................................................................36

Profitability Index............................................................................................ 37

Accounting Rate of Return:............................................................................. 37

Internal Rate of Return:...................................................................................37

Modified Internal Rate of Return.....................................................................38

Risk involved in SS-Designer Business.....................................................................40

Inventory Management...................................................................................40

Trend Analysis................................................................................................. 40

Marketing........................................................................................................ 40

Business Landscape........................................................................................ 41

Real Options............................................................................................................. 41
Analysis of Both Businesses..................................................................................... 42

Introduction of Business No 01
Rawalpindi District , is a district of Pakistan located in the
northern most part of the Punjab province. The district has an
area of 5,286 km2 (2,041 sq mi). The district is sub-divided into
seven tehsils

Serial. No

Tehsil

1
2
3
4
5
6
7

Rawalpindi
Gujar Khan
Kahuta
Kallar Syedan
Kotli Sattian
Murree
Taxila

Population
(1998)
1,409,786
493,000
153,000
190,000
83,255
176,426
151,000

HEALTH IS WEALTH is a common proverb that we hear most in our

life. It is very true that health is very important to all of us. If we
are not feeling well due to any kind of sickness we feel sad and
we feel happiness if we are healthy. Health is really a blessing to
human being and it is also common proverb health is above
wealth.
Serial
No
1
2
3
4
5

Types of Health Facilities

THQ
Rural Health Centers (RHC)
Basic Health Units (BHUs)
Govt. Rural Dispensaries
(GRDs)
Maternal and children Health
Care (MCHs)

Number
4
10
98
6

Tehsil
Taxila
1
0
6
0

13

Total

131

Health care situation in Tehsil Taxila is alarming. The main reason

is poverty of course and the other is unawareness about health
care issues. Besides this government also nothing did such
impressive for the people health as it should be priority for the
government. Seasonal diseases, dengue virus, hepatitus,
malaria, diarrhea, pneumonia and cholera are the diseases
that are mostly faces by our people. Many of targeted of these
diseases are children. Dengue virus a disease that cause to
death prevailing in some areas of the tehsil taxila but Government
tries best in this matter and spread awareness of this virus.
Situations
in
government
hospitals
are
very
bad.
Patients
deal
by
the
doctors in
government
hospitals
like
they
are
treating
animals.
Latest
treatments
for
curing
diseases
are still a dream for common people of Pakistan. As in
government hospitals common facilities are not available. Doctors
are rarely available at the duty. Medicines are not available. If
someone asked by the doctors for some tests machinery is
unavailable and if there is machinery, that will be out of
order. The staff of these hospitals are not cooperative with the
patients as well.
According to survey conducted by THQ hospital Taxila, 33%
patients used the facility of government hospital while 67%
patents go to private hospitals.

10

Capital Budgeting Process

Generation of Idea:The first step in capital Due to poor health facilities in our area
and poor performance of government hospital as well there is
seriously need of a clinical laboratory in our area. Treatment of
patient depend on proper diagnose of disease and laboratory play
a main role in diagnose of disease. So an idea comes in to mind to
establish a proper clinical laboratory.
Screening the Proposal
The second step is to analysis the proposal. According to our
research and proper forecast we have three main options
1) To establish a small laboratory which have investment of
03 millions?
2) To establish a medium laboratory which have investment
cost of 05 millions?
3) To establish a large laboratory which have investment cost
of 07 millions?
Evaluation of Proposal
The third step is to evaluate the proposal. In this step we analysis
there option and select which option is best for us. There are
several pros and cons of each alternative.
If we establish a small laboratory we need very little cost but
there are many small laboratories working in our area. Small
laboratory have no such standards and have no to much
quality.
If we establish a medium laboratory than we need much cost
as compare to small laboratory. According to our market
research medium laboratory can maintain its standards and
quality because of its high cost and trained staff. This is also
a unique laboratory in our area.

11

If we establish a large laboratory in our area than we need to

much initial cost as compare to small and medium
laboratory. There is highly trained staff required for this
laboratory. In our area it is very difficult to search trained
staff due to lack of experienced staff.
After this we look at our resources. We will also analysis our
budget position. We have total budget of 6 millions.

Selection of Investment:
In this step we will select the best investment proposal. According
to our analysis of alternative and resources we select the
alternative 2 which is to establish the medium laboratory.

Implementation and monitor:

Now we are going to implement the decision which we have
selected in above step.

Laboratory Name: - HEALTH WAYS CLINICAL

LABORATORY
Location:- Taxila/Wah

12

13

Market Analysis
Market Size:
The population in our area is 1, 51,000.The overall disease rate in
our area is 10%.
According to research of Dr.Zaman (The director of NIDE) 17.6% of
total population is facing the Diabetes while in distract Rawalpindi
this rate is 16%. In 2030 Pakistan will the be the fourth largest
country of diabetes.
According to CDC report ( Centre for disease Control )
Disease Name
Hepatitis
Cancer
Stroke
T.B

Overall Death
Rate
14%
8%
3%
5%

In Rawalpindi
12%
6%
3%
4%

According to the research of Rawalpindi Medical College the

increase rate in district Rawalpindi is
Disease Name
Liver Diseases
CVC Diseases
COPD Diseases
Stroke
UGIB
Chronic Renal Failure

Rate
33.84%
17.60%
5.14%
12.13%
1.72%
4.35%

14

Customer Analysis:
The customer analysis depends on income level of individual.
Upper Class
15%
Upper Middle Class
20%
Middle Class
40%
Lower Class
25%
The middle, upper middle and upper class is our potential
customer.
Competition Analysis:
There is medium competition in our area. Our competitors are
1.
2.
3.
4.
5.

Agha khan clinical Laboratory

Excel Laboratory
Aslam Opal Diagnostic
Care Clinical Laboratory
Nadeem Clinical Laboratory

The unique point is that we will deliver report of all the tests is on
same day after 2 to 4 hrs from collection of sample while our
competitors delivered the reports of many tests on next day.

15

Market Growth Rate

The market Growth Rate is very high because of our unique
business policy and less competition.
Market Profitability
Market Profitability is overall high due to following factors
1.
2.
3.
4.

Buyers Power
Suppliers Power
Barrier to Entry
Threat to Substitute

---------- Low
---------- Low
---------- Low
---------- Mixed

Industry Cost Structure

Capital requirement ------ Huge
Techinical Staff
------- High

16

Financial Information
The initial Cost of our laboratory is 05 million.
Classification of Initial Cost
1. Abacus Junior Fully Auto analysis Machine (All kinds of
hematology test that is compete blood picture which contain
18 sub tests is performed on this machine while the reading
time is approxmatly 1 min.).Cost of this machine is Rs
600,000

2. Metro Lab Machine ( All Kinds of chemical tests are

performed on this machine like Glucose, Uric Acid,
Creatinine, Urea, Liver Function Test. This machine performs
42 tests related to chemical while the reading time varies
from 5 to 15 mins) Cost of this Machine is Rs 500,000

17

3. Hormones Functions Machine ( All kinds of hormones tests

are performed on this machine like TSH, T3,T4,FSH,LH,TFT
.This machine perform 50 tests while the reading time varies
between 8 to 20 mins).Cost of this machine is Rs 10,00,000

4. Microscope Cost Rs 50,000

18

5. Centrifugal Machine Cost Rs 20,000

6. Water bath Machine Rs 40,000

19

7. Owing Machine Cost Rs 30,000

8. Refrigerator Cost Rs 60,000

9. Devices of different tests like HBsAg, HCV, Typhoid,

Pregnancy, Torch, Rubella, Toxoplasma etc Cost Rs 1,00,000

20

10.
Miscellaneous Equipments like computer, printers,
chemicals and interior Cost Rs 4,00,000
11.

Building Rent for 5 years Cost Rs.6,00,000

12.

Pathologist Contract for 5 years Cost Rs 7,00,000

13.

Working Capital Rs 9,00,000

Calculation of Cash Inflows

Number of patients who visited the clinic daily = 35
Patients who perform tests =20
Division
Average Test
Rate
Total revenue
Monthly Cash
Flow
Yearly Cash Flow

Male
4
350
1400

Female
6
600

Child
10
300

3600
3000
8000*25 = Rs 2,00,000

Total
20

8000

2,00,000*12= Rs 24,00,000

Cash Flow of 5 Years:

Years
Cash
Flows

0
(50,00,0
00)

1
24,00,0
00

2
24,00,0
00

3
24,00,0
00

4
24,00,0
00

5
24,00,0
00

21

Capital Budgeting Techniques:

Net Present Value
i=10%
Years

Cash Flow

Discount

Net Present Value

(Rs)
Factor
(50,00,000)
24,00,000
0.9090
24,00,000
0.8264
24,00,000
0.7513
24,00,000
0.6830
24,00,000
0.6209
Net Present Value

0
1
2
3
4
5

(Rs)
(50,00,000)
21,81,818
19,83,471
18,03,155
16,39,232
14,90,211
40,97,887

Pay Back Period:

Years
0
1
2
3
4
5

Cash Flow

Cumulative Cash

(50,00,000)
24,00,000
24,00,000
24,00,000
24,00,000
24,00,000

Flow (Rs)
Rs.24,00,000
48,00,000
72,00,000
96,00,000
12,000,000

a = Number of year prior to full recovery

b = initial investment
c = Cumulative Cash flow of prior year
d = next year cash flows

Formula

22

a+

2+

bc
d

50,00,000 48,00,000
24,00,000

2.08 years.

23

Discounted Pay Back Period

Year

Cash

Discount

Present Value

Cumulative

Flow

Factor

Rs

Rs

Rs
(50,00,000

(50,00,000)

1
2
3
4
5

)
24,00,000
24,00,000
24,00,000
24,00,000
24,00,000

0.9090
0.8264
0.7513
0.6830
0.6209

2,181,818
1,983,471
1,803,155
1,639,232
1,490,211

2,181,818
4,165,289
5,968,444
7,607,676
9,097,887

a = Number of year prior to full recovery

b = initial investment
c = Cumulative Cash flow of prior year
d = next year cash flows

Formula
a+

2+

bc
d

50,00,000 41,65,289
1,803,155

2.46 years.

24

Profitability Index

PI =
PI

PV of all cash inflows

PV of all cash outflows
Rs .9,097,887
Rs .50,00,000

=
PI

1.8

Accounting Rate of Return:

Average Income

ARR = (Opening investment +Closing investment /2)

24,00,000

ARR= (50,00,000+0/2)
ARR= 96%
Internal Rate of Return
Net Present Value @ 10%= 4,097,887
Now we Calculate NPV @ 50%
Years

Cash Flow

Discount

Net Present

0
1
2
3
4
5

Rs
(50,00,000)
24,00,000
24,00,000
24,00,000
24,00,000
24,00,000
Net Present Value

Factor
0.6666
0.4444
0.2962
0.1975
0.13168

Value RS
(50,00,000)
16,00,000
10,66,666
7,11,111
4,74,074
3,16,049
(8,32,100)

25

iH

NPVL
iL+

NPVLNPVH

IRR =

IRR =

50

Rs .4097887
10 +

Rs .4097887(Rs .8,32100)

IRR = 0.4324
IRR = 43.24%
Modified Internal Rate of Return
Years
1
2
3
4
5

Cash Flow

Future

24,00,000
24,00,000
24,00,000
24,00,000
24,00,000

Value@ 10%
3,513,840
31,94,400
29,04,000
26,40,000
24,00,000
14,652,240

According to 10%:
PV:
Pv

14652240
5
(1+0.1)

= 9,097,888

NPV= PV of all cash inflows- PV of all cash

outflows

26

NPV= Rs.9097888 - Rs.50,00,000

NPV= Rs.4097888
According to 30%:
PV:
Pv5

14652240
(1+0.30)5

= 3946274

NPV= PV of all cash inflows- PV of all cash

outflows
NPV= Rs.3946274 - Rs.50,00,000
NPV= (Rs.1053725)

IRR =

IRR =

iH

NPVL
iL+

NPVLNPVH
30

Rs .4097888
10 +

Rs .4097888(Rs .1053725)

IRR = 25.9%

27

Real Option:The Pictus 700 is a fully automated, random access, floor model
clinical chemistry analyzer. Cost of this machine is Rs 45,00,000

This analyzer has following key features

Efficiency The Pictus 700 incorporates a 95 position
patient sample tray reducing the number of required
daily runs. It also has programmable auto dilution for out of
range tests. The reagents are very stable requiring
few calibrations thus saving time and money. The 72
reagent positions (75 w/ISE) and onboard refrigeration
allow for many tests to be kept on the analyzer at the same
time.
Cost Savings The 700 does not need an expensive water
treatment that requires expensive upfront cost and continual
purchase of filters. More savings will be realized by
utilizing low
cost
reagent, calibrator
and
controls reducing the overall cost per reportable result.

28

Furthermore, the extended service pricing is comparatively

low versus other models of this type.
Easy to Operate The Pictus 700 utilizes Windows based
software for its operation and is very intuitive with barcoding
for sample and reagent identification. It also accepts many
sizes
of
primary
tubes. Periodic
maintenance is
minimal and is easy to perform.
Space Utilization The 700, although a floor model, takes
surprisingly little space in the laboratory.
Now fully automatic chemistry analyzer is install in
some laboratories of Pakistan due to high capital
requirement. But with the passages of time the price of
this machine is reducing. So After 5 years we would
replace our chemistry analyzer metro lab to datron 700
fully automatic.
Risks

Following are the risks which we can bear in our business

29

1. The disorder of machine is main risk which we can face

because in this situation we cannot fulfill the demands.
2. In laboratory different chemicals are used, so it is very
necessary to take care of staff health.
3. There are some chemicals which are not very friends for
environment so there must b proper use of that chemicals.
4. Availability of trained Laboratory staff is also a big risk. In
the case of untrained staff we cannot run our business
properly.
5. Our competitor can purchase better technology than us this
is a risk for us.

30

SS- Designers
Introduction of Business No 02
In our daily life the trend of clothing is changing day by day
because of latest designs. Pakistani Dresses are very famous and
highly preferable clothing wear Worldwide. Pakistani Designer
Suits are best fashion wear with outstanding quality as well as the
fabric has enormous edge over others.
SS Designer have ability to supply all branded Pakistani Suits. We
deal
in
Stitched
Dresses as well as UnStitched Clothes. We
also make custom
size suits as per your
design,
style
and
requirement.
You may see different
Designs as well as
below

Dresses
and
Suit
pattern in the pictures

31

Capital Budgeting Process

Generation of Idea:The first step in capital budgeting process is to generation of idea.
Due to market research and knowledge we came to know that
there is not a good quality ladies designer boutique running in our
area.
Screening the Proposal
The second step is to analysis the proposal. According to our
research and proper forecast we have three main options
1. To purchase a franchise of any brand.
2. To purchase cloths from bigger cities and sale in to our city.
3. To establish own brand. Also sale online using e-commerce.
Evaluation of Proposal
The third step is to evaluate the proposal. In this step we analysis
there option and select which option is best for us. There are
several pros and cons of each alternative.
If we purchase a franchise high volume of capital is required.
Brand has its unique image in the mind of people but we
cannot make innovation in that brand.
If we purchase cloths from bigger cities and sale it in to our
than there is some issue like wastage of time, quality issues
and less profit margin etc
If we have resources and business knowledge we should
make our own brand .We can make innovation in this
business easily. We can easily make our own website and
online sale the cloths.
After this we look at our resources. We will also analysis our
budget position. We have total budget of 2.5 million.

32

Selection of Investment:
In this step we will select the best investment proposal. According
to our analysis of alternative and resources we select the
alternative 3 which is to make own brand and provide cloths to
the people of our area.

Implementation and monitor:

Now we are going to implement the decision which we have
selected in above step.

Brand Name: SS- Designer

Location: Wah Cantt

33

Market Analysis
Market Size:
Cloths are the basis need of every individual. With the passages
of time the styles change. Ladies need new cloths for birthdays,
functions, parties, weddings etc. The population in our area is 1,
51,000 and majority are ladies so here is a good market size.
Customer Analysis:
The customer analysis depends on income level of individual.
Upper Class
15%
Upper Middle Class
20%
Middle Class
40%
Lower Class
25%
Cloths are the basic need to if we provide quality cloths with less
price we can target the all income level people.
Competition Analysis:
There is high competition in our area. Our competitors are
1.
2.
3.
4.
5.
6.

JJ
Warda
Metro
Stylo
Zara
Shaposh

Market Growth Rate

The market Growth Rate is very high because of our large market
area and demand.

34

Market Profitability
Market Profitability is overall high due to following factors
5.
6.
7.
8.

Buyers Power
Suppliers Power
Barrier to Entry
Threat to Substitute

---------- Low
---------- Low
---------- Low
---------- Mixed

Industry Cost Structure

Capital requirement ------ Mixed
Designers Cost
------- Mixed

35

Financial Information
Initial Cash Outflow:
Description

Cost

Building

Rs 5,00,000

Material- Cloth

Rs 7,00,000

Designers, Machines, Labors

Rs 3,00,000

Outlet plus Marketing

Rs 6,00,000

Online Website and

Advertisement

Rs 1,00,000

Working Capital

Rs 3,00,000

Calculation of Cash Inflows

Number of suits sale in month =26
Patients who perform tests =20
Division
Average Test
Rate
Total revenue
Monthly Cash
Flow
Yearly Cash Flow

Casual
10
1000
10,000

Party
4
2750
11,000

Office
6
1500
9000
50000

50,000*12= 200,000

Weeding
1
20,000
20,000

36

Cash Flow of 5 Years:

With growth rate of 15% every year
Years
Cash
Flows

0
(25,00,0
00)

1
6,00,00
0

2
6,90,00
0

3
7,93,50
0

4
9,12,52
5

5
10,49,4
04

Capital Budgeting Techniques:

Net Present Value
i=10%
Years
0
1
2
3
4
5

Cash Flow
(25,00,000)
6,00,000
6,90,000
7,93,500
9,12,525
1,049,404
Net Present Value

Discount

Net Present

Factor
0.9090
0.8264
0.7513
0.6830
0.6209

Value
(25,00,000)
5,45,455
5,70,248
5,96,168
6,23,267
6,51,597
4,86,735

37

Pay Back Period:

Years
0
1
2
3
4
5

Cash Flow

Cumulative Cash

(25,00,000)
6,00,000
6,90,000
7,93,500
9,12,525
1,049,404

Flow
6,00,000
1,290,000
2,083,500
2,996,025
4,045,429

a = Number of year prior to full recovery

b = initial investment
c = Cumulative Cash flow of prior year
d = next year cash flows

Formula

a+

3+

bc
d

2,500,000 2,083,500
9,12,525

3.46 years.

38

Discounted Pay Back Period

Year

Cash

Discount

Present Value

Cumulative

Flow

Factor

Rs

Rs

Rs
(25,00,000

(25,00,000)

1
2
3
4
5

)
6,00,000
6,90,000
7,93,500
9,12,525
1,049,404

0.9090
0.8264
0.7513
0.6830
0.6209

5,45,455
5,70,248
5,96,168
6,23,267
6,51,597

5,45,455
1,115,703
1,711,871
2,335,138
2,986,735

a = Number of year prior to full recovery

b = initial investment
c = Cumulative Cash flow of prior year
d = next year cash flows

Formula
a+

4+

bc
d

25,00,0002,335,138
6,51,597

4 + 0.25
4.25 years.

39

Profitability Index

PI =
PI

PV of all cash inflows

PV of all cash outflows
Rs .2986735
Rs .25,00,000

=
PI

1.2

Accounting Rate of Return:

Average Income

ARR = (Opening investment +Closing investment /2)

4045429/5

ARR= (50,00,000+0/2)
ARR= 0.647
ARR= 64.7%
Internal Rate of Return:
Net Present Value @ 10%= 486,735
Now we Calculate NPV @ 30%
Years
0
1
2
3
4
5

Cash Flow

Net Present

(25,00,000)
6,00,000
6,90,000
7,93,500
9,12,525
1,049,404

Value
(25,00,000)
4,61,538
4,08,284
3,61,174
3,19,500
2,82,635
(6,66,869)

40

IRR =

IRR =

iH

NPVL
iL+

NPVLNPVH

30

Rs .486735
10 +

Rs .486735(Rs .666896)

IRR = 0.184
IRR = 18.43%
Modified Internal Rate of Return
Years
1
2
3
4
5

Cash Flow
6,00,000
6,90,000
7,93,500
9,12,525
1,049,404

Future Value
8,78,460
9,18,390
9,60,135
1,003,778
1049404
4,810,167

According to 10%:
PV:
Pv5

4810167
5
(1+ 0.1)

= 2986735

NPV= PV of all cash inflows- PV of all cash

outflows

41

NPV= Rs.2986735 - Rs.2500000

NPV= Rs.486735
According to 15%:
PV:
Pv5

4810167
(1+0.15)5

= 2391503

NPV= PV of all cash inflows- PV of all cash

outflows
NPV= Rs.2391503 - Rs.2500000
NPV= (Rs.108497)

IRR =

IRR =

iH

NPVL
iL+

NPVLNPVH
15

Rs .486735
10 +

Rs .486735(Rs .108497)

IRR = 14.08%

42

Risk involved in SS-Designer Business

Inventory Management
To operate this type of brand, owners must keep an adequate
supply of clothing on hand. When customers enter the store in
pursuit of the hottest leather handbag or the fall seasons line of
trench coats, they expect the merchandise to be available in the
color and size of their choosing. Failure to purchase enough
inventory results in disgruntled customers and lost sales. On the
other hand, businesses that purchase too much inventory may
incur steep losses by selling the excess clothing at discount
prices. A second risk of buying too much inventory is incurring
excessive storage costs. Storing clothing in a temperature
controlled warehouse is a time-sensitive cost that can be reduced
or managed by proper inventory management. Frances Harder
advises in her book, Fa$hion for Profit, that additional
accessories be sold on consignment. Buying and selling
goods in this manner is one method of reducing the risk of buying
inventory at full price.
Trend Analysis
Another risk of the clothing business is trend assessment. Trends
in the fashion industry are fickle, ever-changing and often elusive.
A successful store capitalizes on the latest trends and recognizes
when such trends are on the decline. One misstep may result in
excessive inventory, undermined credibility and confused brand
identity for the store. All of these errors may prove fatal in the
clothing industry. Stores may avoid these mistakes by hiring
experienced buyers, purchasing well-respected brands and buying
commercialized clothing instead of risky, avant garde, hit-or-miss
pieces

43

Marketing
Clothing stores may incur risks through their marketing strategies.
The business must target the appropriate audience and offer
items that correspond with this demographic. Additionally, the
brand must adapt to changing economic conditions. In times of
recession, for example, companies that purvey expensive items
should amend their line to include less costly garments. A clothing
business should enter the market with a clearly defined niche, as
well. Petite and plus sizes, maternity wear, athletic gear, "tween"
apparel and travel gear are examples of such niches. Mary
Gehlhar describes in her book, The Fashion Designer
Survival Guide, how Michael Kors explained to the press
that one of his clothing lines was dubbed carpool
couture: This collection was aimed at mothers who spend
ample time in the car.
Business Landscape
The nature of the clothing industry as a whole poses significant
risks to business owners. Cutthroat competition is a large risk:
Charlene Davis, author of the book, Starting Your Own Clothing
Store and More, explains that profit, when it finally comes after
years of being in the business, is pennies on the dollar. Davis
asserts that you must be willing to work late hours on weekends
and perform a host of side tasks, such as unloading merchandise
and designing window displays.
Real Options
With the passage of time now technology come in to the market
which reduces cost and also save time. So we will sale the old
machines and adopt the new technology which fulfills the
requirement of modern era.

44

Analysis of Both Businesses

Techniques
Net Present Value
Payback Period
Discounted Payback Period
Profitability Index
Accounting Rate of Return
Internal Rate of Return
Modified IRR

Business No 01
Rs. 4,097,887
2.08 Years
2.46 Years
1.8
96%
43.24%
25.9%

Business No 02
Rs. 486,735
3.46 Years
4.25 Years
1.2
64.7%
18.43%
14.08%

We will accept the business No 1 (Clinical Laboratory)

Higher the Net present Value

Payback Period is low then Business No 02
Discounted Payback Period Is also low.
Profitability Index is High
Accounting Rate of Return is also greater
Note: We will main focus on Net Present Value at the
time of acceptance of project.