Course Project Week 3

Course Project Week 3

Week 3 Project Activity: Capital Expenditure Budget (Draft)

Use the Budget Proposal Workbook.xlsx and Budget Proposal Template.docx to develop and present a capital expenditure budget for your new business startup. You will be graded on correct analysis, proper use of spreadsheet technology, and business-like presentation of the information.

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Section 3.0 Capital Expenditure Budget (Draft) DeliverablePointsCapital Expenditures items have been correctly identified.6Cost of these items appear reasonable and based on primary research.6The Capital Expenditure budget is properly constructed in the Excel template and the calculations appear correct.4The Capital Expenditure section of the word template is complete and correctly describes the capital expenditure budget and underlying assumptions.4Total Points20

PAPA GEO’S RESTAURANT13

Papa Geo’s Restaurant

Budget Proposal

for

[2020-2024]

 

 

 

 

 

 

 

 

 

 

 

 

 

Table of Contents

 

Section Title Subsection Title Page Number

1.0

Executive Summary

    4

2.0

Sales Forecast

    4
   

2.1

Sales Forecast

 
   

2.2

Methods and Assumptions

 

3.0

Capital Expenditure Budget

    4

4.0

Investment Analysis

    5
   

4.1

Cash Flows

5
   

4.2

NPV Analysis

5
   

4.3

Rate of Return Calculations

6
   

4.4

Payback Period Calculations

6

5.0

Pro Forma Financial Statements

    7
   

5.1

Pro Forma Income Statement

7
   

5.2

Pro Forma Balance Sheet

7
   

5.3

Pro Forma Cash Budget

8

6.0

Works Cited

    8

7.0

Appendices

    8
   

7.1

Appendix 1: [description]

 
   

7.2

Appendix 2: [description]

 

 

 

 

 

 

 

 

1.0 Executive Summary

 

 

Papa Geo’s Restaurant needs to be competitive and unveil marketing crusades to protect their returns in the business. However, it is guided by typical objectives in the marketing plan. The first objective of the restaurant is ensuring customer satisfaction and loyalty. The target market entails about 10,000 families which is a totality of lower to middle class clients with zero direct competition. However, the customers’ satisfaction is determined the customer’s loyalty to the restaurant especially due to the services that they receive. The restaurant wins the customers through the good Italian food of low price. Stunning cleanliness of the restaurant is welcoming and eye catching which applies to both the foods served and the environment. Generation of the restraint traffic will impact the Restaurant towards success. The restaurant will cultivate a customer base such as having demanding lunchtimes and dinner services through intensive marketing. It will achieve this through weekly and monthly promotions as the marketing strategies.

The restaurant needs to attain their financial goals. The objective is to meet the financial income goal of $40000 annually. At the starting of the second year the company expects to attain a minimum of 2% profits of the sales. The main objective of the restaurant is profitability. It is attainable with the managerial ability to achieve the weekly goals especially through cost reduction with profitability growth concurrently.The restaurant needs to develop a restaurant brand. As the restaurant grows successfully, it will improve it’s place in the local market and toughen the brand. The quality of the food served has a great influence on the restaurant branding. The company purposes to cook using healthy products and use the brand to win new customers (Myers, 2019).

 

 

2.0 Sales Forecast

 

The sales forecast table illustrates the restaurants ability to offer services to the clients through listing the total services sold and the net sales in every year.

2.1 Sales Forecast

 

  Year 1 Year 2 Year 3 Year 4 Year 5
Sales $1,074,150 $2,157,700 $2,390,100 $2,625,920 $2,880,040

 

 

 

The sales are expected to rise each year as the restaurant continues to gain a higher customer base each year through marketing.

2.2 Methods and Assumptions

The sales forecast figures were obtained from the customer surveys which are based on the Italian fast food industry. Using the historical analysis of other restaurants with similar services and the customer base similar to that of this restaurant, we were able to structure the sales for each year in the next five years.

 

 

3.0 Capital Expenditure Budget

 

 

year 1 year 2 year 3 year 4 year 5      
$204,360 $393,000 $411,800 $440,500 $460,700 (payroll)    
$50,000 $53,000 $53,000 $52,000 $50,000 (marketing)  
$25,000 $30,000 $34,000 $37,000 $41,000 (utilities)    
$12,000 $38,000 $43,000 $44,000 $45,000 (repairs/maintainance)
$2,400 $10,000 $11,000 $13,000 $15,200 (dishes/ cleaning supplies)
$15,000 $18,000 $22,000 $24,000 $31,000 (employee healthcare)
$17,000 $50,000 $50,000 $50,000 $5,000 (rent)    
               
$325,760 $606,000 $624,800 $660,500 $647,900      
               

 

 

 

This data was gathered from numerous consumer surveys of the fast food industry. Using the data, we were able to develop the most crucial costs for every restaurant and then estimate the increment of capital expenditure as the restaurant’s sales grow.

 

 

 

 

 

 

4.0 Investment Analysis

 

The discount rate used in the calculations is 5 % since it is the most dominant rate that most restaurants similar to this one use (Van den Berghe.et.al, 2019). The net present value of the firm is calculated as $2,695,521

which illustrates that the company’s investment is very productive. In addition, the rate of return in all years indicates that the company’s profitability is approximately twice the amount of investment that was made.

4.1 Cash flows

 

year 1 year 2 year 3 year 4 year 5  
$1,074,150 $2,157,700 $2,390,100 $2,625,920 $2,880,040 (cash sales)
$69,045 $134,673 $148,117 $162,899 $179,146 (taxes)
$10,300 $12,000 $13,000 $14,000 $15,000 (sales of current assets)
($204,360) ($393,200) ($411,860) ($431,453) ($451,717) (cash spending)
($570,420) ($1,380,599) ($1,493,514) ($1,619,145) ($1,758,632) (bill payment)
$378,715 $530,574 $645,843 $752,221 $863,837 (net cash flow)
$495,311 $1,112,740 $1,537,093 $2,508,380 $2,647,942 (cash balance)
           

 

 

 

 

4.2 NPV Analysis

npv        
year 1 year 2 year 3 year 4 year 5
$378,715 $530,574 $645,843 $752,221 $863,837
$360,680.00 $481,246 $557,903 $618,854 $676,838
         
Npv $2,695,521      

 

4.3 Rate of Return

 

  current value of investment original value of investment rate of return
year 1 1,000,000 250,000 400
year 2 2,000,000 1,000,000 200
year 3 2,200,000 1,500,000 147
year 4 2,500,000 1,700,000 147
year 5 2,900,000 1,900,000 152

 

 

 

4.4 Payback Period

 

  cash inflow cumulative cash flows initial oulay remaining payment
year1 $378,715 $378,715 -1,000,000 -621,285
year 2 $530,574 $909,289   288,004
year 3 $645,843 $1,555,132    
year 4 $752,221 $2,307,353    
year 5 $863,837 $3,171,190    
  $3,171,190      
    payback period is two years    

 

 

 

 

 

 

 

 

 

 

 

 

 

5.0 Pro forma Financial Statements

 

This section represents the financial analysis of the activities which takes place within the restaurant. It helps us understand the profitability of a firm, its cash inflows and outflows as well as the amounts of assets and liabilities that a company possesses (Fernando, 2019)

5.1 Pro Forma Income Statement

pro formula income statement          
  year 1 year 2 year 3 year 4 year 5
net sales $1,074,150 $2,157,700 $2,390,100 $2,625,920 $2,880,040
direct costs of sales $375,103 $700,340 $770,238 $847,101 $931,564
operating expenses $325,760 $606,000 $624,800 $660,500 $647,900
taxes incurred $114,899 $200,001 $238,831 $281,506 $328,753
net profits $258,388 $651,359 756,231 $836,813 $971,823

 

 

 

 

 

5.2 Pro Forma Balance Sheets

 

pro forma balance sheet        
cash $495,311 $1,112,740 $1,537,093 $2,508,380 $2,647,942
inventory $14,331 $26,756 $29,427 $32,364 $35,591
Other Current Assets ($10,300) ($22,300) ($35,300) ($49,300) ($64,300)
net current assets $499,342 $1,117,196 $1,531,220 $2,491,444 $2,619,233
longterm assets $0 $0 $0 $0 $0
liabilities          
current borrowing 0 $0 $0 $0 $0
accounts payable $98,320 $114,831 $123,464 $133,942 $145,495
other current liabilities $69,045 $203,718 $351,835 $514,734 $693,880
net current liabilities $167,364 $318,549 $475,299 $648,675 $839,374
earnings $258,388 $651,359 756,231 $836,813 $971,823

 

 

 

 

 

5.3 Pro Forma Cash Budget

pro forma cash flows          
cash sales $1,074,150 $2,157,700 $2,390,100 $2,625,920 $2,880,040
sales of current assets $10,300 $12,000 $13,000 $14,000 $15,000
cash spending ($204,360) ($393,200) ($411,860) ($431,453) ($451,717)
additional cash spent ($570,420) ($1,380,599) ($1,493,514) ($1,619,145) ($1,758,632)
net cash flow $309,670 $395,901 $497,726 $589,322 $684,691
cash balance $495,311 $1,112,740 $1,537,093 $2,508,380 $2,647,942

 

6.0 Works Cited

 

List any sources you cited in the body of your report.

 

Fernando, H. S. K. S. B. (2019). Business Proposal on Rail Carriage Manufacturing&Repairing Plant in Sri Lanka (Master’s thesis, 华南理工大学).

Myers, M. D. (2019). Qualitative research in business and management. Sage Publications Limited.

Van den Berghe, H., De Meyere, M., Denys, K., & Calcoen, J. (2019). Proposal business plan WRC network-December 2019. Proposal business plan WRC network-December 2019.

 

 

7.0 Appendices

 

NOTE: Start this section at the top of a new page.

This section of the budget proposal is where you’ll attach all of the supporting materials that you’ve referenced in the preparation of your plan and that is too detailed or extensive to be included in the body of the report. Use this page to separate the appendices from the text in the body of your report. Make certain that you update the table of contents to include the title of each exhibit in the appendix and its page number.

7.1 Appendix 1: [put a description here]

7.2 Appendix 1: [put a description here]

7.3 Appendix 1: [put a description here]