XI.

FINANCIAL FEASIBILITY

Salaries Expense 400,000

Installation Expense 100,000

Miscellaneous Expense 200,000
Depreciation Expense 26,180

 Funding

 Use of Funds

Pre-operating expense 700,000

Fixed Assets to be acquired 523,710

Initial Working Capital 276,910
Total 1,500,000

 Sources of Funds

Equity Contribution 1,200,000

Bank Loan 300,000

Total 1,500,000

Major Assumptions

 Sales 1,500,000 in year 1 to increase 22,000 kilos every year or total of

3,300,000 sales increase.
 Cost of Sales is 60% of the Sales.

 Operating Expenses
 The total fixed asset will be depreciated using straight line method and are expected
to have average useful life of 20 yrs. Other expenses except salaries will vary every year in
increase of 1%. The installation expense will only appear during the first year.

 Fixed asset to be acquired is P523, 710 in year 1 to increase by 2% every year.

 Capitalization

Owners Equity 1,200,000

Bank Loan 300,000

The amount of Bank Loan is already net cash proceeds which mean that the interest is
already deducted in advance.

Financial Projection

Dive Fish Distribution Company

Forecasted Income Statement

For the first Five Years

 Year1 Year2 Year3 Year4 Year5

Sales 1,800,000 5,100,000 8,400,000 11,700,000 15,000,000

Less: Cost of Sales 648,000 3,060,000 5,040,000 7,020,000 9,000,000
Gross Profit 1,152,000 2,040,000 3,360,000 4,680,000 6,000,000
Less:
Operating Expenses
Salaries 400,000 400,000 400,000 400,000 400,000
Installation 100,000 - - - -
Miscellaneous 200,000 202,000 204,020 206,060 208,120
Depreciation 26,186 26,186 26,186 26,186 26,186
Total Expenses 726,186 628,186 630,206 632,246 639,306
Net Earnings 425,814 1,411,814 2,729,794 4,047,754 5,365,694

Dive Fish Distributor Company

Projected Balance Sheet

For the first Five Years

Year1 Year2 Year3 Year4 Year5

ASSETS:
Cash 1,428,000 2,380,002 3,663,484 4,946,733 6,229,744
Fixed Assets 523,710 534,184 544,868 555,765 566,880
Accumulated (26,286) (52,372) (78,558) (104,744) (130,930)
Depreciation.
Total Assets 1,925,814 2,861,814 4,129,794 5,397,754 6,665,694
LIABILITIES AND
EQUITY
Loan Payable 300,000 250,000 200,000 150,000 100,000
Owners Equity 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000
Retained Earnings 425,814 1,411,814 2,729,794 4,047,754 5,365,694
Total Liabilities & 1,925,814 2,861,814 4,129,794 5,397,754 6,665,694
Equity

Dive Fish Distributor Company

Projected Cash Flow
For the first Five Years

Estimated Cash Inflows: Year1 Year2 Year3 Year4 Year5

Sales 1,800,000 5,100,000 8,400,000 11,700,000 15,000,000

 Partners Investment 1,200,000 - - - -
Proceeds from bank loan 300,000 - - - -
Total Cash Inflow 3,300,000 5,100,000 8,400,000 11,700,000 15,000,000
Estimated Cash Outflow:
Operating Expenses & 1,121,710 4,087,814 7,055,834 10,355,854 13,655,874
Cost of sales
Acquisition of Fixed 523,710 10,474 10,684 10,897 11,115
Assets
Cash Payment for bank 50,000 50,000 50,000 50,000 50,000
loan
Total Cash Outflow 1,871,710 4,148,288 7,116,518 10,416,751 13,716,989
Cash Balance 1,428,290 951,712 1,283,482 1,283,249 1,283,011
ADD: Beginning Balance - 1,428,290 2,380,002 3,663,484 4,946,733
Cash Ending Balance 1,428,290 2,380,002 3,663,484 4,946,733 6,229,744

Financial Analysis

 Return on Investment = Average Net Income/Average Equity

=2,796,174/ 1,200,000
=.233
` = 23.3%

 Average Net Income=Sum of annual net income for 5 yrs./5

=425,814+1,411,814+2,729,794+4,047,754+5,365,694
5
=13,980,870/5
=P2, 796,174

 Average Equity= (Equity of year 1+year5)/5

=1,200,000+1,200,000
2
=2,400,000
 2
=P1, 200,000