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You plan to start a business that sells waterproof sun block with a unique formula that reduces the damage of UVA radiation 30 per cent
You plan to start a business that sells waterproof sun block with a unique formula that reduces the damage of UVA radiation 30 per cent more effectively than similar products on the market. You expect to invest 50000 in plant and equipment to begin the business. The targeted price of the sun block is 15 per bottle. You forecast that unit sales will total 1500 bottles in the first month and will increase by 20 per cent in each of the following months during the first year. You expect the cost of raw materials to be 3 per bottle. In addition, monthly gross wages and payroll are expected to be 13000, rent is expected to be 3000 and other expenses are expected to total 1000. Advertising costs are estimated to be 35000 in the first month but to remain constant at 5000 per month during the following 11 months. You have decided to finance the entire business at one time using your own savings. Is an initial investment of 75000 adequate to avoid a negative cash balance in any given month? If not, how much more do you need to invest up front? How much do you need to invest up front to keep a minimum cash balance of 5000 ? What is the break-even point
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