Question Two friends, Novak and Scott have created a company (Nova Scotia Ltd), to sell a range of novel 3 D printed objects, which they will sell through a well known online market place They have approached their bank manager for a 6 loan of 100,000 to establish the business They plan to initially buy 4 Professional 3 D printers at a cost of 2,934 each, and set up a printers workshop in rented premises Novak and Scott plan to invest 22,000 on fixtures and fittings for the workshop, and 6,600 on computers Novak and Scott anticipate that the fixtures and fittings, computers and printers will all have a useful economic life of 5 years, with a resale value of 10 of purchase price Due to the rise in expected output an additional 5 printers will be purchased in year 3 for 14,670 They intend to draw a salary of 45,000 each until the business becomes established Additional financial forecasts for the business are detailed below As output increases there will be additional savings on material and packaging costs due to bulk purchase discounts Year 1 Year 2 Year 3 Sales forecast in units 11,975 24,008 33,650 Average selling price per unit 9 99 10 99 11 99 Labour costs 90,000 90,000 90,000 Material costs 15,009 33,429 58,375 Packaging costs 4,002 8,954 14,594 Postage costs 9,005 22,087 43,781 Rent of premises 12,000 12,500 13,000 Overheads 9,000 9,500 10,000 Purchase of printers 11,736 14,670 Computers 6,600 Fixtures and Fittings 22,000 Required (show your workings for each answer) Calculate the breakeven point, profit loss and margin of safety for each of the 3 years based on forecast figures Prepare a cash flow forecast for the first 12 months of trading Evaluate whether Nova Scotia Ltd is a good investment from the banks perspective Sales in the first month are anticipated to be 560 units, growing by 10 month on month Cash from sales will be received one month after the sale has occurred Materials will initially be paid in cash until month 4 at which point a one month credit period will be extended by suppliers Postage costs will be paid one month in arrears The rent is payable quarterly in advance All other costs will be paid as they are incurred

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Question : Two friends, Novak and Scott have created a company (Nova Scotia Ltd), to sell a range of novel 3-D printed objects, which they

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Two friends, Novak and Scott have created a company (Nova Scotia Ltd), to sell a range of novel 3-D printed objects, which they will sell through a well-known online market place. They have approached their bank manager for a 6% loan of 100,000 to establish the business. They plan to initially buy 4 Professional 3 D printers at a cost of 2,934 each, and set up a printers workshop in rented premises. Novak and Scott plan to invest 22,000 on fixtures and fittings for the workshop, and 6,600 on computers. Novak and Scott anticipate that the fixtures and fittings, computers and printers will all have a useful economic life of 5 years, with a resale value of 10% of purchase price. Due to the rise in expected output an additional 5 printers will be purchased in year 3 for 14,670. They intend to draw a salary of 45,000 each until the business becomes established. Additional financial forecasts for the business are detailed below. As output increases there will be additional savings on material and packaging costs due to bulk purchase discounts.

	Year 1	Year 2	Year 3
Sales forecast in units	11,975	24,008	33,650
Average selling price per unit	9.99	10.99	11.99
Labour costs	90,000	90,000	90,000
Material costs	15,009	33,429	58,375
Packaging costs	4,002	8,954	14,594
Postage costs	9,005	22,087	43,781
Rent of premises	12,000	12,500	13,000
Overheads	9,000	9,500	10,000
Purchase of printers	11,736		14,670
Computers	6,600
Fixtures and Fittings	22,000

Required: (show your workings for each answer)

Calculate the breakeven point, profit/loss and margin of safety for each of the 3 years based on forecast figures
Prepare a cash flow forecast for the first 12 months of trading.
Evaluate whether Nova Scotia Ltd. is a good investment from the banks perspective

Sales in the first month are anticipated to be 560 units, growing by 10% month on month. Cash from sales will be received one month after the sale has occurred. Materials will initially be paid in cash until month 4 at which point a one month credit period will be extended by suppliers. Postage costs will be paid one month in arrears. The rent is payable quarterly in advance. All other costs will be paid as they are incurred.