King Kong, a popular fufu joint, operated by Macho, is a customer of L400 Microcredit Ltd. They have requested for a loan to expand their operations. After interviewing him, you (Project Officer) come-up with the following information.

• Ingredients for preparing soup costs GH 200.00 per month. This excludes purchases of fish (GH 200.00 per month), three goats per week at GH 150,00 per goat, and two akprantie per day (six days in a week) at GH 50.00 per akrantie.
• Cassava and plantain for preparing the fufu at GH 200.00 per month.
• Sales for the fufu averages GH 500.00 per month.
• They make a minimum gross margin of 35% on the sale of fish, mutton and Akrantie.
• Macho operates the chop bar with four assistants with each earning GH 70.00 per week. Macho is not on a regular wage yet.
• They own a fridge with which they sell both alcoholic and non-alcoholic drinks. Electricity and water bills per month averages GH 100.00 and GH50.00 respectively. They also purchase LPG gas once every two weeks for GH200.00
• They spend GH240.00 per month on the drinks and make a minimum gross margin of 10% on the drinks.

The proposal is to enable King Kong add the sale of Banku and okro soup to the existing business, Macho estimates that they can make a minimum gross margin of 60% on the sale of banku and okro soup. The loan request is to enable him undertake the following:

• Purchase a sack of cassava dough at GH 150.00 per month.
• Spend GH 150..00 per month to prepare the okro soup
• Purchase a big cooking pot and other utensils, estimated at GH 350.00 for preparing the banku and okro soup. They will require a new cylinder at a cost of GH 150.00 and LPG purchases will increase by GH 200.00 per month.
• He estimates that the purchase of fish, muttonand akrantie will increase by 50% per month due to the new line of business.In addition, they will purchase dry fish at GH 100.00 per month.
• Miscellaneous expense on the proposed expansion is estimated at 5% per month of the cost of all existing purchases.

A new deep freezer has been paid for at a cost of GH1,500.00, from their own resources. This will enable then meet the increase in demand for the drinks. Their suppliers have agreed to provide them with trade credits of 90 days on the estimated increase in the quantity of drinks that may arise from the expanded business.. They have requested for a loan for a period of six months, The existing balance on their savings account is GH20.00 The formula below was used to calculate sales

Sales = Cost of Sales/(1 - Gross Margin)

Round up all calculations to one decimal place

1. Determine the projected Net Cash Flow for King Kong for the next four months, based on the interview and the proposal made to the L400 Microcredit Ltd.
2. Briefl outline the challenges facing micro and small entrepreneurs in their businesses, .