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READ COURSE DESCRIPTION FOR PAPA GEOS RESTAURANT AND FOLLOW ALL DIRECTIONS FOR IT. PLEASE MAKE SURE EVERYTHING IS CONSISTENT AND MAKES SENSE

\fDeVry University Course Project Description BUSN278 Budgeting and Forecasting BUSN278 Course Project Project Overview This is an individual project where you will be acting as a consultant to an entrepreneur who wants to start a new business. As the consultant, you'll create a 5-year budget that supports the entrepreneur's vision and strategy, as well as the needs for equipment, labor, and other start-up costs. You can choose from one of three types of new business start-upsa landscaping company, a restaurant, or an electronics store that sells portable computing devices. Each business has its own business profile detailed in the sections below. The purpose of the business profile is to guide you in understanding the scope of the business, the entrepreneur's start-up costs, and financial assumptions. The project requires you to create a written budget proposal, a supporting Excel workbook showing your calculations, and a PowerPoint presentation summarizing the key elements of the budget proposal, which you assume will be presented to a management team. This is an individual project. Each week you will complete a section of the project in draft form. In Week 7, you will submit the final version of the project's budget proposal, budget workbook, and budget presentation in PowerPoint. Deliverables Schedule and Points Week 1 2 3 4 5 6 7 7 Deliverable Section 1.0 Executive Summary (Draft) Section 2.0 Sales Forecast (Draft) Section 3.0 Capital Expenditure Budget (Draft) Section 4.0 Investment Analysis (Draft) Section 5.1 Pro Forma Income Statement and 5.2 Balance Sheet (Draft) Section 5.3 Pro Forma Cash Budget (Draft) Final Budget Proposal Final Presentation with PowerPoint Total project points Points 10 10 10 10 10 10 90 30 180 Copyright 2010 by DeVry Educational Development Corporation. All rights reserved. No part of this work may be reproduced or used in any form or by any meansgraphic, electronic, or mechanical, including photocopying, recording, Web distribution or information storage and retrieval systemswithout the prior consent of DeVry Educational Development Corporation. Page 1 of 9 qattachments_4befc4332a026db92b9153ad0aed7b780b1aeb1f.docx DeVry University Course Project Description BUSN278 Budgeting and Forecasting Business Profile: Papa Geo'sRestaurant Vision The vision of the entrepreneur is to create a single-location, sit-down Italian restaurant called Papa Geo's. The goal is to generate an income of $40,000 per year, starting sometime in the second year of operation, as wells as profit that is at least 2% of sales. Strategy a) Market Focus and Analysis The restaurant targets middle- to lower middle-class families with children, as well as adults and seniors, located in Orlando, Florida. The area within 15 minutes of the store has 10,000 families, mostly from lower to middle-class neighborhoods. Average family size is four people per household. There is no direct competition; however, there are fast food restaurants like McDonald's, Taco Bell, and Wendy's in the geographical target market. The lower to middle-class population is growing at about 6% per year over the next 5 years in this area. b) Product The product is Italian food served buffet style, in an all-you-can-eat format, with a salad bar, pizza, several different types of pasta with three or four types of sauces, soup, desserts, and a self-serve soda bar. The restaurant is also to have a 500 square foot gaming area that has game machines that children would be interested in using. c) Basis of Competition Customers come to this restaurant because of the good Italian food at a low price you can get a meal for $7, including drinks. Customers also eat at Papa Geo's due to the cleanliness of the facility, the speed of getting seated and served, and the game machines that keep the children busy while adults enjoy their meal. Start-Up Requirements* Given Costs Copyright 2010 by DeVry Educational Development Corporation. All rights reserved. No part of this work may be reproduced or used in any form or by any meansgraphic, electronic, or mechanical, including photocopying, recording, Web distribution or information storage and retrieval systemswithout the prior consent of DeVry Educational Development Corporation. Page 2 of 9 qattachments_4befc4332a026db92b9153ad0aed7b780b1aeb1f.docx DeVry University Course Project Description BUSN278 Budgeting and Forecasting The cost of registering a limited liability company in Floridafiling fees listed at the bottom of the application located at http://form.sunbiz.org/pdf/cr2e047.pdf Renovation of the facility expected to cost $15,000 Business insurance, estimated at $1,000 per year Health and other benefits at 20% of the salaries of the manager and assistant manager Costs you should estimate through research, experience, or other methods Soda fountain bar Two pizza ovens Salad and pizza/dessert bar Approximately 100 square foot commercial refrigerator Two cash registers Six video game machines Management office with desk and lower priced laptop computer Staff lunchroom equipment such as microwave, sink, cupboards, and refrigerator 20 four-seat tables with chairs Busing cart for transporting dirty dishes from the dining area to the dishwashing area 140 sets of dishes, including cutlery and drinking cups Commercial dishwasher Miscellaneous cooking and food handling equipment like trays, lifters, spoons, pots, and so on The cost of an average of seven employees on the payroll All operating costs, such as advertising, rent for a 3,500 square foot facility with male and female washrooms (already installed), utilities, maintenance, and annual depreciation *If you have questions about start-up requirements, or think that other start-up costs necessary for the business are missing, then make an assumption and state it in the relevant section of the report. Given Financial Assumptions* The owner will be granted a loan for the initial start-up, repayable over 10 years at current interest rates for small business loans. Copyright 2010 by DeVry Educational Development Corporation. All rights reserved. No part of this work may be reproduced or used in any form or by any meansgraphic, electronic, or mechanical, including photocopying, recording, Web distribution or information storage and retrieval systemswithout the prior consent of DeVry Educational Development Corporation. Page 3 of 9 qattachments_4befc4332a026db92b9153ad0aed7b780b1aeb1f.docx DeVry University Course Project Description BUSN278 Budgeting and Forecasting The owner will use personal funds to operate the business until it generates enough cash flow to fund itself. Essentially, all sales are made by credit card. All credit card sales are paid to the restaurant daily by the credit card company. A total of 2.5% of sales are paid to the credit card company in fees. Food suppliers give 30 days of trade credit. Inventories are expected to be approximately 10% of the following month's sales. The average meal costs $4 in materials and labor. The average family spends $4 on vending machine tokens. Equipment is depreciated on a straight-line basis over 5 years. Managers have health benefits, and other workers do not. The company will operate from 10:00 a.m. to 9:00 p.m., 7 days a week. The entrepreneur will manage the store and draw a salary. Every shift has one person on the cash register, one keeping the food bars stocked with food, two cooking the food, one on busing and table cleaning, a manager, and an assistant manager. *If you believe any other assumptions are necessary, please state them in your budget proposal. Copyright 2010 by DeVry Educational Development Corporation. All rights reserved. No part of this work may be reproduced or used in any form or by any meansgraphic, electronic, or mechanical, including photocopying, recording, Web distribution or information storage and retrieval systemswithout the prior consent of DeVry Educational Development Corporation. Page 4 of 9 qattachments_4befc4332a026db92b9153ad0aed7b780b1aeb1f.docx DeVry University Course Project Description BUSN278 Budgeting and Forecasting Business Profile: The Cutting EdgeLandscaping Vision The vision of the entrepreneur is to create a five-team landscaping business that caters to upscale neighborhoods in Miami, Florida. The company is to be called The Cutting Edge. The goal of the entrepreneur is to generate income of at least $42,000 per year as his personal salary, as well as profits of 4% after tax no later than the second year of operation. The entrepreneur intends to buy a route of 100 homes from a lawn service company whose owner is retiring. Strategy a) Market Focus and Analysis The landscaping business targets upscale neighborhoods with home associations that demand lawns to be manicured and well cared for. Customers tend to be upper middle to upper class individuals with household income levels of $110,000 or more. The geographic focus is Miami and its surrounding area. The area is expected to show slow economic growth of about 1% per year over the next 5 years. b) Product The product is lawn maintenance and landscaping services as well as minor irrigation equipment repair. The primary source of income is expected to be in the form of lawn-cutting, debris-blowing, and edge-trimming services. However, the company will also do reseeding, landscaping and foliage or tree planting, tree trimming, and light irrigation system repair when necessary to keep its customer's lawns watered and healthy. c) Basis of Competition Customers hire the Cutting Edge due to its employees' reliability (showing up when they are supposed to), its quality lawn service, and its ability to keep lawn sprinkler systems in good repair, sparing the homeowner the inconvenience of calling a sprinkler repair for minor repairs such as broken or clogged sprinkler heads or other minor sprinkler system repairs. Start-Up Requirements* Given Costs Copyright 2010 by DeVry Educational Development Corporation. All rights reserved. No part of this work may be reproduced or used in any form or by any meansgraphic, electronic, or mechanical, including photocopying, recording, Web distribution or information storage and retrieval systemswithout the prior consent of DeVry Educational Development Corporation. Page 5 of 9 qattachments_4befc4332a026db92b9153ad0aed7b780b1aeb1f.docx DeVry University Course Project Description BUSN278 Budgeting and Forecasting The cost of registering a limited liability company in Floridafiling fees listed at the bottom of the application located at http://form.sunbiz.org/pdf/cr2e047.pdf Business insurance, estimated at $1,000 per year No health benefits except for the owner of the business Workers' compensation fees The cost of the initial route of 100 homes, at a cost of $120,000 Costs you should estimate through research, experience, or other methods Team equipment for lawn cutting, which includes equipment for a twoperson team o A pickup truck o A trailer o A large riding lawnmower o A smaller riding lawnmower o A push lawnmower o Two gas-powered lawn trimmers o Two gas-powered lawn edgers o Safety equipment for eye and ear protection o Tools for minor equipment repair on the job o A drink cooler o Two gas-powered blowers o Two tree or hedge trimmers o Two long ladders o Buck saws for cutting branches The cost of 10 workers, two per team All operating costs such as advertising, phone, a small 400 square foot office complete with utilities, Internet, laptop computer, accounting software like QuickBooks, office supplies, and annual depreciation on equipment. *If you have questions about start-up requirements, or think other start-up costs necessary for the business are missing, then make an assumption and state it in the relevant section of the report. This list is not necessarily complete. Given Financial Assumptions* The owner will be granted a loan for the initial start-up, repayable over 10 years at current interest rates for small business loans. Copyright 2010 by DeVry Educational Development Corporation. All rights reserved. No part of this work may be reproduced or used in any form or by any meansgraphic, electronic, or mechanical, including photocopying, recording, Web distribution or information storage and retrieval systemswithout the prior consent of DeVry Educational Development Corporation. Page 6 of 9 qattachments_4befc4332a026db92b9153ad0aed7b780b1aeb1f.docx DeVry University Course Project Description BUSN278 Budgeting and Forecasting The owner will use personal funds to operate the business until it generates enough cash flow to fund itself. Essentially, 60% sales are made by credit card and 40% are made by check. All credit card sales are paid to the company daily by the credit card company. A total of 2.5% of credit card sales are paid to the credit card company in fees. The average lawn service costs $150 per month. Irrigation repairs are minimal at an average of $50 per customer per year, and landscaping and other services are about $200 per customer per year. Equipment is depreciated on a straight-line basis over 5 years. The owner has health benefits, and other workers do not. Each lawn takes about 1.5 hours to cut and manicure, as well as any other repairs or extra services like tree or shrub trimming. The entrepreneur will manage the company and draw a salary, but will not service lawns or perform other services. *If you believe any other assumptions are necessary, please state them in your budget proposal. Copyright 2010 by DeVry Educational Development Corporation. All rights reserved. No part of this work may be reproduced or used in any form or by any meansgraphic, electronic, or mechanical, including photocopying, recording, Web distribution or information storage and retrieval systemswithout the prior consent of DeVry Educational Development Corporation. Page 7 of 9 qattachments_4befc4332a026db92b9153ad0aed7b780b1aeb1f.docx DeVry University Course Project Description BUSN278 Budgeting and Forecasting Business Profile: Wireless WorldWireless Device Retail Store Vision The vision of the entrepreneur is to create a single-location retail operation that sells portable wireless devices called Wireless World. The company sells phones, wireless e-book readers, high-end notebook and netbook computers, iPads, and other wireless computing devices. Strategy a) Market Focus/Analysis This store targets tech-savvy individuals who are mostly students from wealthy families or working adults between the ages of 22 and 49 years of age. These individuals either purchase the products because they love wireless gadgets, think the gadgets will improve their productivity, or think the wireless gadgets are fashionable and consistent with their lifestyle. The store is located in a high-end shopping center called Millennia Mall alongside Neiman Marcus, Macy's, and other high-end stores. b) Product Products are cutting edge wireless devices from brand name companies, as well as specialty companies that have unique products that are not readily available at other stores. c) Basis of Competition Customers shop at the store for the high-end shopping experience; knowledgeable staff; superior customer service and return policies; and the broad selection of well-known, brand-name products, as well as lesser known companies with highly unique and innovative wireless devices. They also shop at the store because it is stocked with cutting-edge products that are new to the market. Start-Up Requirements* Given Costs The cost of registering a limited liability company in Floridafiling fees listed at the bottom of the application located at http://form.sunbiz.org/pdf/cr2e047.pdf Copyright 2010 by DeVry Educational Development Corporation. All rights reserved. No part of this work may be reproduced or used in any form or by any meansgraphic, electronic, or mechanical, including photocopying, recording, Web distribution or information storage and retrieval systemswithout the prior consent of DeVry Educational Development Corporation. Page 8 of 9 qattachments_4befc4332a026db92b9153ad0aed7b780b1aeb1f.docx DeVry University Course Project Description BUSN278 Budgeting and Forecasting Renovation of the facility expected to cost $25,000 Business insurance, estimated at $1,000 per year Health and other benefits are 20% of the salaries of the manager and assistant manager Initial investment in inventory is $20,000 Costs you should estimate through research, experience, or other methods The cost of an average of seven employees on the payroll All operating costs, such as advertising, rent for a 3,500 square foot facility with male and female washrooms (already installed), utilities, maintenance, and annual depreciation. *If you have questions about start-up requirements, or think other start-up costs necessary for the business are missing, then make an assumption and state it in the relevant section of the report. Given Financial Assumptions* The owner will be granted a loan for the initial start-up, repayable over 10 years at current interest rates for small business loans. The owner will use personal funds to operate the business until it generates enough cash flow to fund itself. Essentially, all sales are made by credit card. All credit card sales are paid to the store daily by the credit card company. A total of 2.5% of sales are paid to the credit card company in fees. Merchandise suppliers give 30 days of trade credit. Inventories are expected to be approximately 10% of the following month's sales. Managers have health benefits, and other workers do not. The company will operate from 10:00 a.m. to 9:00 p.m., 6 days a week. The entrepreneur will manage the store and draw a salary. *If you believe any other assumptions are necessary, please state them in your budget proposal. Copyright 2010 by DeVry Educational Development Corporation. All rights reserved. No part of this work may be reproduced or used in any form or by any meansgraphic, electronic, or mechanical, including photocopying, recording, Web distribution or information storage and retrieval systemswithout the prior consent of DeVry Educational Development Corporation. Page 9 of 9 qattachments_4befc4332a026db92b9153ad0aed7b780b1aeb1f.docx Papa Geo's Restaurant Budget Proposal for [2015-2020] BUSN-278 Papa Geo's Restaurant Table of Contents Section Title 1.0 Executive Summary 2.0 Sales Forecast 3.0 Capital Expenditure Budget 4.0 Investment Analysis 5.0 Subsection Title 2.1 Sales Forecast 2.2 Methods and Assumptions 4.1 Cash Flows 4.2 NPV Analysis 4.3 Rate of Return Calculations 4.4 Payback Period Calculations 5.1 Pro Forma Income Statement 5.2 Pro Forma Balance Sheet 5.3 Pro Forma Cash Budget 7.1 Appendix 1: [description] 7.2 Appendix 2: [description] Pro Forma Financial Statements 6.0 Works Cited 7.0 Appendices Page Number Papa Geo's Restaurant 1.0 Executive Summary Papa Geo's' will be a single located Italian restaurant. It will be a locally owned Italian outlet that will be positioned as a local business with a strong focus on creative image and artistic presentation so as to attract more and more consumers across the city. The restaurant will have a strong focus on value pricing and excellent quality food. With an emphasis on this, the company will be able to attract more and more consumers across the city. The restaurant will be located at the main at a crowded location at the main market of the concerned city. The restaurant will not compete with the well-established international brands, but will have a strong focus on serving high quality food so as to attract additional consumers. The focus will be to attract middle to lower-middle class families in the Orlando, Florida area. With this plan, the revenue is expected to grow at 10% per annum. The restaurant will focus on serving Italian food to its target consumers with a concept of buffet style. The tentative menu will consist of various salads, pizzas, and an assortment of pastas with three to four kinds of different sauces, soup, desserts and self-servicing soda bar. One of the other attractions for the consumers will be a 500 sq. ft. gaming area where children can play different games of their interest. This will help in attracting additional consumers across the city. Papa Geo's Restaurant With a strong focus on quality and delivering the food at low pricing will attract other consumers. The company is forecasting the growth in its consumers by a minimum of 10% per annum, whereas the inflation will be considered as 5%. The company will be charging $7 per person for buffet. The company will have an average net cash flow of $39,581 per annum. The cost of capital will be estimated to be 12% and the NPV of the company will be $31267, and IRR of 13%. The company will generate profit of about $41738 in first year of its operations. 2.0 Sales Forecast The restaurant will strongly center on delivering quality food and services to its customers to gain more regulars. Being a part of a highly competitive service industry the company will give a strong emphasis on the training of the employees and learning to deliver the best quality and service. Having a major focus on this, the restaurant will be able to attract about 1,30,000 customers in a year, which will be expected to grow at the rate of 5%. Year 1 2 3 4 5 130000 136500 143325 150491.25 158015.813 $7.00 $7.35 $7.72 $8.10 $8.51 Revenue generated $910,000 $1,003,275 $1,106,111 $1,219,487 $1,344,484 Total revenue generated $910,000 $1,003,275 $1,106,111 $1,219,487 $1,344,484 Sales forecast for buffet style Revenue per unit (Buffet) Papa Geo's Restaurant 2.2 Methods and Assumptions The sales will be forecasted on the basis of the market analysis conducted. There are various tools and techniques which are used by an organization to expand the marketing plan of the business. Businesses utilize different tools and techniques which assist in market segmentation and developing the marketing plan of the organization. With the changing needs, demand of the customers and the strong focus on high quality tasting food and really low prices this will attract more business from customers across the city. With the expected growth of population by 6%, the company has also assumed that the business of the customers will grow by atleast 5%. However, we do expect higher inflation and thus project outflows to grow at 7.5% every year. 3.0 Capital Expenditure Budget Capital Expenditure budget Renovation and facility cost Soda fountain bar 2 pizza oven Salad and pizza / dessert bar Refrigerator Cash registers $15,000.00 $700.00 $2500.00 $6,000.00 $1800.00 $100.00 Papa Geo's Restaurant 6 video game vending machines Management office with desk and low priced laptop 20 four seat tables with chairs Busing Cart Staff Luncheon Set of Dishes Commercial dishwasher Cooking and food handling Delivery van Lightning Equipments Bar Fittings Total Expenditure $20000.00 $900.00 $40000.00 $400.00 400 $3,000.00 $1250.00 $400.00 60000 30000 12725 $195175 The restaurant will focus on investing in these assets to render proper services to the customers, which will help the company to provide excellent services to the customers. Capital Investment is one of the major decisions that need to be taken into consideration by a major organization and helps in analyzing the project in the perspective of risk. Some of the aspects such as risk and return, agency cost, and shareholders wealth are the aspects which plays an important role in the capital budgeting development. It's very important for the manager to analyze the risk profile of the investment incurred, to set the return and the hurdle rate of the project. If the project causes high risk then the payback of the project should be quick and the hurdle rate should be higher than WACC (Weighted Average Cost of Capital). 4.0 Investment Analysis The uncertainties in the economy have increased greatly along with the increase in the competitive interactions and different risks pertaining to a particular decision, particularly in Papa Geo's Restaurant respect to the investment decisions. According to different analyst and academicians, capital budgeting is one of the best measures which helps in analyzing the capital budgeting process. The decision on capital outlays is among the most significant a firm has to make. A decision to build a new plant or expand into a foreign market may influence the performance of the firm over the next decade. Capital budgeting helps in determining how a firm should invest its capital. Different capital budgeting choices used is payback period, which looks at the time or number of years required to cover the initial outlay or investment in the project. Accounting rate of return, which is known as return on investment, meaning measures the profitability of an investment considering its financial statements. Discounted Payback period is the analysis the time or number of years required to cover the initial outlay or investment in the project considering the present value of all the cash inflows. Net Present Value measures the present value of all the cash inflow from the project and compare the same with the starting investment, if the present value of cash inflows is positive, then the project is accepted else it is not accepted NPV = Present value of cash inflows - Initial investment). Finally, profitability index measures the present value of cash inflows at the required rate of return to initial cash outflow of the investment. 4.1 Cash flows The cash flows of the company will be analyzed on the basis of the different costs and expenses that will be incurred by the restaurants. Here, we have assumed that Papa Geo's Restaurant Year 0 1 2 3 4 5 Sales Cash Inflow per person 910000 $1,003,275 $1,106,111 $1,219,487 $1,344,484 7 7.35 7.71 8.1 8.51 Cash outflow per person 6.08 6.53 7.02 7.55 8.12 Net Cash Flow -156775 837200 822685.5 763216.4 670717.9 524348.9 4.2 NPV Analysis The Net Present Value (NPV) is extensively used along with reliable methods when managing capital budgeting decisions. It is defined as \"the difference between what something is worth (the present value of its expected future cash flowsits market value) and what it costs\" (Emery, 2007, p. 221). Additionally, NPV uses discounted cash flow techniques to determine the value of the project's cash flow. Net present value is determined by discounting back the inflows over the life of the investment to find if they equal or exceed the required investment. The basic discount rate is most times the cost of capital to the firm. Therefore, inflows that come in later years must provide a return that at least equals the cost of financing those returns. WACC or cost of capital plays a critical role in calculating NPV as WACC is for discounting rate through which the NPV of the project is evaluated. NPV has two significant advantages: (1) all the cash flows are discounted to the present value and (2) the discounting rate is determined by WACC. Note that a high-risk investment includes higher interest rates, which goes to lower the present value of the benefits. A low-risk investment consists of lower interest rates, which tends to increase the present value of the Papa Geo's Restaurant benefits. The major disadvantage of NPV is it requires estimates of future interest rates, which may change. In addition, NPV uses estimates of cash flow costs and benefits, which also may change in the future. NPV = $2,513,817 Year 0 1 2 3 4 5 Sales 910000 $1,003,27 5 $1,106,11 1 $1,219,48 7 $1,344,48 4 Cash Inflow per person Cash outflow per person 7 7.35 6.08 6.53 7.71 7.02 8.1 7.55 8.51 8.12 Net Cash Flow -156775 837200 822685. 5 763216. 4 670717. 9 524348. 9 DF @ 12% PV 1 0.893 0.797 -156,775 747,620 655,680 0.712 543,410 0.636 426,577 0.567 297,306 NPV 2,513,81 7 4.3 Rate of Return Internal rate of return is considered the actual rate of the investment; it is the rate where NPV is 0The IRR is the interest rate that matches the present value of the cost of our investment directly against the present value of the future benefits received. The future benefits can be seen in the form of a stream of payments over a period of time or a lump sum (salvage value) Papa Geo's Restaurant received. The IRR is the interest rate that occurs when the NPV is zero. If the NPV is zero, then by definition, the present value of the costs must equal the present value of the benefits. The IRR follows the rule of time value of money. It is most appropriate for comparing investments that have unequal initial cash outlays and unequal lives. A disadvantage of the IRR is that it requires complex interest calculations and may in some cases be difficult to explain. However, keep in mind that a business usually has a cutoff rate, or hurdle rate (a minimum rate of return for investments), that is used with the NPV method. If the present value of the benefits exceeds the present value of the costs using this hurdle rate, then the internal rate of return must be higher than the hurdle rate. Therefore, the IRR is only required by a business owner or manager who wants to know the actual return on investment. The method that we recommend for selecting an investment is the NPV method because cash flows are assumed to be reinvested at the hurdle (WACC) rate. In using IRR, cash flows are assumed to be reinvested at the IRR. Year Sales Cash Inflow per person Cash outflow per person 1567750 0 1 2 3 4 5 Net Cash Flow 910000 $1,003,27 5 $1,106,11 1 $1,219,48 7 $1,344,48 4 7 6.08 7.35 6.53 7.71 7.02 8.1 7.55 8.51 8.12 IRR 837200 822685. 5 763216. 4 670717. 9 524348. 9 40% DF @ 12% PV 0.893 1,567,75 0 747,620 0.797 655,680 0.712 543,410 0.636 426,577 0.567 297,306 1 Papa Geo's Restaurant 4.4 Payback Period Payback results into the number of years a project requires to bring back the actual investment or cash outflows. In figuring the payback, a business looks at how long an asset's cost will be tied up in the investment, as well as the project's profitability. To determine payback, the approach is to determine the investment cost and divide this by the annual aftertax benefits that the investment generates. This is one of the easiest methods for calculating payback. However, the main disadvantages are that it does not consider the time value of money and it tends to lead to concentration on investments that satisfy immediate goals or those with a fast payback. Year 0 1 2 3 4 5 Sales 910000 $1,003,275 $1,106,111 $1,219,487 $1,344,484 Cash Inflow per person 7 7.35 7.71 8.1 8.51 Cash outflow per person 6.08 6.53 7.02 7.55 8.12 Net Cash Flow -156775 837200 822685.5 763216.4 670717.9 524348.9 Pay back Period= less than 1 year 5.0 Pro forma Financial Statements DF @ 12% 1 0.893 0.797 0.712 0.636 0.567 PV -1,567,750 747,620 655,680 543,410 426,577 297,306 Papa Geo's Restaurant Financial planning is one of the most important aspects which focus on planning for the short term as well as the long term. The short term planning focuses on the 12 months perspective which focuses on ensuring that the firm generates enough cash so as to pay off its current liabilities and cater day to day needs and the long term planning focuses on the planning horizon of 5 or more years. Long term planning is focused on long term investment goals and objectives of the organization. 5.1 Pro Forma Income Statement Particulars Consumables Advertising Credit card Fees Interest Expense@5.5% Amount 350000 25000 13650 11000 305,0 00 Staff Salary Cash Register Checker Table Waiters( per hour basis) $40,000 Chef and Cook Cleaner Manager Assistant Manager Owner $90,000 $20,000 $45,000 $40,000 $50,000 Rent Health Insurance Depreciation Business Insurance Maintenance Renovation $20,000 63000 17,0 00 22396 1000 10000 15000 Particulars Gross Receipts Inventory(Closing) Amount 910000 20000 Papa Geo's Restaurant Power Expenses Filing Fees 45000 125 Net profit 51829 930000 930000 Assumptions: Considering the workforce of seven indivduals, it was imperative to assume of higher sales revenue in order to cover the cost and register for profits. Power expenses were necessary to be included as lightning and power expenses are part of a restaurant operation 5.2 Pro Forma Balance Sheets Liabilities Equity Capital Net Profit Business Loan Current Liabilities Acc. Depreciaiton Projected Balance sheet Amount Assets 50000 Fixed Assets 51829 Soda Fountain Machine 200000 Pizza Oven( 2 in quantity) Salad and Dessert Bar 22396 Commerical Refrigerator Video Game Machines Cash Register Office Desk Laptop Furniture Busing Cart Commercial Dishwasher Miscallenous Cutlaries Delivery Van Lighting Equipments Bar Fittings Total Fixed Assets Amount $700 2500 $6,000 $1,800 20000 100 $500 $400 $20,000 $400 $1,250 $400 $60,000 $30,000 $12,725 $156,775 Papa Geo's Restaurant Current Assets Deposit Inventory Cash & Bank balance 324225 $28,450 $20,000 $119,000 $324,225 5.3 Pro Forma Cash Budget Cash Budget Revenues 910000 Consumbales Advertising Staff Salary Health Insurance Business Insurance Rent Power Expenses 350000 10000 305000 17000 1000 63000 45000 119000 6.0 Works Cited List any sources you cited in the body of your report. 7.0 Appendices Papa Geo's Restaurant 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]