During the pandemic, Singapore saw a significant jump in pet ownerships, many of whom were first$-$time pet owners. According to Animal Veterinary Service$$s group director Jessica Kwok, the number of dog licences increased from about $70,000$ in $2019$ to about $87,000$ in $2022.$

Based on a Euromonitor International report, the pet dog population in Singapore $($including unlicensed dogs$)$ is around $114,000$ in $2023,$ up by almost $3$ per cent from $2019.$ On the other hand, pet cat population hovers around $94,000$ in $2023,$ a jump of almost $10$ per cent compared with $2019.$

According to Mr$.$ Kam Kok Yen, head of animal health at Boehringer Ingelheim, pet owners are spending more on their beloved $$furkids$,$ fuelled by the humanisation of pets. He remarked that more pet owners are looking into the animals$$ health and well$-$ being as they treat the animals more like family rather than just a pet.

Meanwhile, as Singapore and other countries exit from the pandemic phase and embrace COVID$-19$ as endemic, countries have opened up their borders and international travels are on the rise again. Mr$.$ Steven Ler, president of the National Association of Travel Agents Singapore $($NATAS$)$ reckoned that the travel industry is in the midst of a $$huge comeback$.$ He further commented, $$The appetite for overseas travel is high as many desire to explore the world again and go $$revenge travelling$,$ in hopes of making up for lost time.$$

As pet owners plan for their overseas trips, they are faced with the problem of arranging for the care of their $$furkids$$ in their absence$.$

While this is an issue for pet owners, you see this as an opportunity. You believe there is an attractive business proposition to start a pet hotel to meet the growing demand for pet boarding services, particularly in the mid$-$to$-$high tier segment as $$pawrents$$ are now more willing to splurge on pampering their $$furkids$,$ ensuring that their pets will be well$-$taken care of whilst they are away.

Starting and operating a pet hotel requires significant investment and good planning before commencing on this venture. You shared this idea at a recent networking event and an interested potential investor has requested for a preliminary proposal prior to further discussion.

Required:

The report should include a detailed financial analysis to demonstrate the financial viability of the venture.

Additional info:

$1.$ You are able to invest $$60,000$ of the Total Investment Required $($TIR$)$ as your Equity Capital. The Balance of the TIR would be funded by the potential investor. However, the investor is only willing to invest between $40\%$ to $70\%$ of the Balance of the TIR as his Equity Capital $($you will need to propose the amount and subsequently determine the corresponding shareholding offered to the investor$).$

The remaining shortfall in the Balance of the TIR will be extended as a loan from the investor to the business at the start, with only interest payable each month $($see further for Cost of Debt$)$ and the full repayment of the principal on

the $36$th month.

$2.$ The following Cost of Capital $($Weighted Average Cost of Capital, WACC$)$ formula must be used $($no marks will be awarded if any other WACC formula is used$)$:

WACC $=$ E xRe $+$ D xRd x$(1$Tc$)$ VV

$$ Re $=$ Cost of Equity

$$ Rd $=$ Cost of Debt

$$ E $=$ Funding from Equity

$$ D $=$ Funding from Debt $/$ Loans

$$ V $=$ E $+$ D $($i$.$e$.,$ total funding$)$

$$ E$/$V $=$ Percentage of Financing that is Equity

$$ D$/$V $=$ Percentage of Financing that is Debt

$$ Tc $=$ Corporate Tax Rate

$3.$ Specific Tax Exemptions, Credits and Reliefs $($e$.$g$.,$ Tax Exemption Scheme for New Start$-$Up Companies$),$ Concessions, Rebates, Loss$-$Carrying Forward and similar Schemes are to be ignored in computations.

$4.$ The depreciation for any capital expenditure is a straight line over three $(3)$ years.

Thank you.