The following information relates to The Marshes Gallery, which has been set up by Clara Pilbeam to help rural craftspeople to sell their products to the tourist trade. Clara is sub- mitting a business plan to Midlays Bank plc. She has found what she thinks are ideal premises: a disused colliery building in South Wales. She has saved 4,000 as initial cap- ital, which she would pay into the Gallery's bank account on 1 July 2010, which will be the effective starting date of the enterprise. Forecast information for the six months to 31 December 2010 is as follows: The landlord requires a deposit of 3,000, and rent of 1,000 per month, payable quarterly in arrears. The deposit will be paid on 1 July 2010, the first quarter's rent on 2 October 2010, the second quarter on 3 January 2011. Income will be generated from commissions on works of art sold through the gallery. The average commission taken by the gallery will be 40%, and sales of artworks are forecast as follows:

Transcribed Image Text:

July 8,000 August 4,000 September 7,000 October November December 12,000 18,000 24,000 All sales are for cash, and are banked immediately without deduction. Amounts due to artists are paid one month after the relevant sales are made. The Gallery will receive a one-off grant of 5,000 from the Welsh Tourist Board in August. The cost of redecorating the building will be 7,000, payable in two instalments: 4,000 in August, the balance in September. General overheads (including any bank interest payable) are expected to be 2,000 per month, payable one month in arrears. Wages to assistants will be 750 per month and are payable at the end of the month. Clara Pilbeam will draw 600 per month until December, when she will draw 900. Various items of equipment will be purchased for 3,000 in July, payable two months later. Depreciation for the six months will be 150. Initial advertising will cost 500, payable in August. Prepare a cash flow forecast for The Marshes Gallery for the six months to 31 December 2010. Comment on the forecast, and state whether you think that the project appears feasible.