Project Appaisal
Submmited To: Prof Nazaqat Hussain
Submitted By : Hamza Kayani
M.com (iv) Roll G2F14MCOM0012
Final Project
6/13/2016
Contents
TOPIC........................................................................................................................................................... 3
Pest Analysis: .............................................................................................................................................. 3
Political .................................................................................................................................................... 3
Economical: ............................................................................................................................................. 3
Social: ...................................................................................................................................................... 3
SWOT Analysis: ........................................................................................................................................... 4
Strengths ................................................................................................................................................. 4
Weaknesses ............................................................................................................................................ 4
Opportunities .......................................................................................................................................... 4
Threats : .................................................................................................................................................. 4
Methodology............................................................................................................................................... 5
Intial Cash Outlay: ....................................................................................................................................... 5
Breakup of Intial Cash Outlay: .................................................................................................................... 5
Raw material ............................................................................................................................................... 6
Sale Item wise ................................................................................................................................................. 7
Balance sheet ................................................................................................................................................ 15
Cash Flow ...................................................................................................................................................... 16
Result & findings ....................................................................................................................................... 16
Interpretation of Formulas Apply on Cash Flow ........................................................................................... 16
Pay Back Period: ............................................................................................................................................ 16
Discounted pay back ..................................................................................................................................... 17
Net Present Value ......................................................................................................................................... 17
Profitability Index .......................................................................................................................................... 17
Internal Rate Of Return ................................................................................................................................ 17
Weighted Average Cost of capital................................................................................................................. 18
Terminal Cash Flow ............................................................................................................................... 18
Conclusion & Recommendations ................................................................................................................. 18
TOPIC
This project is of project appraisal in which I choice a new company which I start in pakistan . It will help
me a lot to understand how the cashflow works.
Pest Analysis:
A PEST analysis is the Political, Economic, Socio-cultural and Technological factors that are affecting this
business.
Political
Food safety regulations
Information regulations
Regulations covering sectors other than agriculture; environmental requirements, workers' safety, trade
policies.
Change in welfare assistance
Competition commission
European competition law Economical Seasonality issue (fruits and vegetables mainly)
Economical:
Crises/Recession : affect the demand for various products
Unemployment
Rise of commodity prices such as gas and oil which affect the production cost Social Change of lifestyle :
More takeaway, junk food
Social:
Consumer attitude in favour of environmental & ethical sourcing of products in 'British food'
Technological:
Sales via mobile - thanks to applications
Information and communication consumers access information easily .
Supply chain optimization Consumer target group Open to general public.
SWOT Analysis:
A SWOT analysis. The Strengths Weaknesses, Opportunitys, and Threats facing this company. Grocery
Market PEST Analysis Who are the main competitors ? The UK baking industry is based on three major
sectors: plant bakeries, in-store bakeries and craft bakeries.
Tehzeeb Bakers
Also:
In-store bakeries such as Waitrose and M&S
Strengths
loyal customer base
Variety in the high class and standard of bread
New organic bakery specializing in gluten, wheat and dairy free products
Strong presence in niche segment
Reliable explanation of how they are producing
Weaknesses
No presence in large market, only one retail outlet on South Wales.
Rely only on sending the bread delivery time reduces the quality
The company does not operate physically except its headquarters
Higher labor costs due to hand-production techniques - (35% higher cost of production)
Opportunities
Open more outlets untapped growth potential in a number of suburban markets
The opportunity to have a successful expansion is achievable.
Consumer Taste Trends change, and consumer tastes are constantly evolving
Threats :
Competition from other cheaper chains but offering high quality bread Waitrose - freshly baked
organic Saturate the market - niche segment will it become harder to find attractive locations for new
stores and slow companys growth According to data from National Association of Master Bakers
there are 98 other bakeries in UK specializing in luxury bread production.
Dieting trends (i.e. Atkins diet) could affect consumer demand for bread.
Methodology
Intial Cash Outlay:
intial Cash Outlay Rupees
Total 1,876,442
The intial cash outlay is 1,87,6442 Rupees which is sum of Total asset purchased and working capital.
Total
Req. Unit Cost Cost
Sr. No Description of Item Qty (Rs.) (Rs.)
1 Production Tables 2 5,000 10,000
2 Chairs & Other Furniture 10,000 10,000
3 Cost of Renovation and Interior Designing 125,000 125,000
4 Air conditioner 1 45,000 45,000
5 Vertical Freezer 1 30,000 30,000
Weighing Scales (For Cash Counter &
6 Production) 1 5,000 5,000
7 Micro Wave Oven 1 10,000 10,000
8 Sign Board 1 10,000 10,000
9 Miscellaneous 1 25,000 25,000
Total 270,000
Working Capital
Raw Material Inventory 106,692
Building Rent 225,000
Cash 150,000
Total Working Capital 481,692
To start production we need the Raw material or begning inventories to make them available for sale
after processing. We also need cash which is required for meeting petty expenses. Advance Building rent
is also paid before starting a business so it is also add in working capital.
Raw material
The raw materials are required for production of different varieties of bakery and confectionary products.
The complete details of raw materials along with recipe of different product are as follow:
Units of % Qty Qty Qty Qty
measur ingredients Ingredients Ingredients Ingredients Ingredients
e in grams For Making For Making
Raw
Quantity Rate Cost For Making 1 Kg (gms) 1 Pound
material:
1 Kg (gms)
Snacks
Per Piece
Assumption:
All the figures in this financial model have been calculated for estimated sales of Rs. 11.24
million in the year one. The capacity utilization during year one is worked out at 70% with
5% increase in subsequent years up to the maximum capacity utilization of 95%.
Plain & Dry Cakes
Plain cakes
Units of % Qty Qty Qty Qty
measur ingredie Ingredie Ingredie Ingredie Ingredients
e nts nts nts in nts For For Making 1
Raw
Quantity Rate Cost grams Making 1 Pound (gms)
material:
For Kg (gms)
Making 1
Kg
Butter Kg 280 450 125,959 21.73% 303 225 225 102.058
Sugar Kg 50 60 2,986 3.86% 333 40 40 18.144
Flour Kg 373 50 18,661 28.97% 393 300 300 136.078
(Maida)
Baking Kg 12 60 746 0.97% 12 10 10 4.536
powder
Eggs Pcs 11,594 7 81,157 34.77% 7,261 9 360 163.293
Flavour Ltr. 1 500 311 0.05% 1 0.5 1 0.227
Cream Kg 124 400 49,762 9.66% 100 100 45.359
and
Honey
279,582 100.0% 8,302 1,036
Plain fruit cakes
Units of % Qty Qty Qty Qty
measur ingredie Ingredie Ingredie Ingredie Ingredients
e nts nts nts in nts For For Making 1
Raw
Quantity Rate Cost grams Making 1 Pound (gms)
material:
For Kg (gms)
Making 1
Kg
Butter Kg 316 450 142,012 24.498% 162 250 250
Sugar Kg 50 60 3,030 3.920% 178 40 40
Flour Kg 316 50 15,779 24.498% 211 250 250
(Maida)
Baking Kg 13 60 757 0.980% 6 10 10
powder
Fruit Kg 379 60 22,722 29.397% 66 300 300
Chunks
Samolina Kg 63 80 5,049 4.900% 66 50 50
(Sooji)
Eggs Pcs 3,865 7 27,052 11.759% 3,888 3 120
Flavours Ltr. 1 500 316 0.049% 0.32 0.5 0.5
216,716 100.00% 4,578 1020.5
Dry cakes
Units of % Qty Qty Qty Qty
measur ingredie Ingredie Ingredie Ingredie Ingredients
e nts nts nts in nts For For Making 1
Raw
Quantity Rate Cost grams Making 1 Pound (gms)
material:
For Kg (gms)
Making 1
Kg
Butter Kg 357 450 160,629 22.167% 545 225 225
Sugar Kg 63 60 3,807 3.941% 545 40 40
Flour Kg 436 50 21,814 27.094% 545 275 275
(Maida)
Baking Kg 16 60 952 0.985% 22 10 10
powder
Eggs Pcs 14,492 7 101,446 35.468% 16,364 9 360
Flavour Ltr. 8 500 3,966 0.493% 1.09 5 5
Cream + Kg 159 400 63,458 9.852% 100 100
Honey
356,072 100.00% 18,023 1015
Sweets & Nimko Qty Qty
Nimko Ingredie Qty Ingredie
Raw material: Units of % nts in Ingredie nts
measur Quantity Rate Cost ingredie Qty Ingredients grams nts For 1 Pound
e nts For Making 1
Making 1 Kg (gms)
Kg
Gram Flour (Baisn) Kg 485 90 43,639 68.293% 491 700 700
Dry Fruit Kg 139 160 22,166 19.512% 123 200 200
Chickpeas Kg 69 120 8,312 9.756% 61 100 100
(Channey)
Nimko Masala Kg 17 150 2,598 2.439% 25 25 25 25
Sweets
Units of % Qty ts Qty Qty Qty
measur ingredie Ingredie Ingredie Ingredie Ingredie
e nts n nts in nts For nts
Raw material: Quantity Rate Cost grams Making 1 1 Pound
For Kg (gms) (gms)
Making 1
Kg
Solidified wholemilk Kg 1,801 400 720,290 33.816% 1,050 350 350
(Khoya)
Flour (Maida) Kg 1,158 50 57,880 21.739% 263 225 225
Eggs Kg 21,300 7 149,100 15.459% 131 4 160
Ghee Kg 772 175 135,054 14.493% 53 150 150
Sugar syrup or Sugar Kg 772 800 617,391 14.493% 919 150 150
1,679,716 100% 2,415 1035
Chicken Pizza
Raw Units of Quantity Rate Cost % Qty Qty Qty
material: measure ingredie Ingredie Ingredie Ingredients
nts nts nts in For Making 1
grams Kg (gms)
For
Making 1
Kg
Flour Kg 930.58 50 46,529 19.417% 336.00 200 200
(Maida)
Oil Ltr 69.79 190 13,261 1.456% 33.60 15 15
Yeast Kg 4.65 180 838 0.097% 1.68 1 1
Sugar Kg 93.06 60 5,583 1.942% 33.60 20 20
Salt Kg 18.61 15 279 0.388% 3.60 4 4
Chicken Kg 1,395.87 275 383,865 29.126% 480.00 300 300
Onion Kg 930.58 40 37,223 19.417% 720.00 200 200
Masala Kg 186.12 84 15,634 3.883% 84.00 40 40
Cheese Kg 465.29 800 372,233 9.709% 180.00 100 100
Mayonnai Kg 232.65 90 20,938 4.854% 120.00 50 50
se &
Ketchup
Mix Kg 465.29 80 37,223 9.709% 120.00 100 100
Vegetable
s
4,793 933,607 100% 2,112 1030
* Figure are rounded off at zero decimal
Units of % Qty Qty Qty Qty
measur ingredie Ingredie Ingredie Ingredie Ingredie
e nts nts nts in nts For nts For
Raw
Quantity Rate Cost grams Making 1 Making 1
material:
For Kg (gms) Pound
Making 1 (gms)
Kg
Flour Kg 416.02 50 20,801 14.648% 336.00 150 150
(Maida)
Oil Ltr 55.47 190 10,539 1.953% 33.60 20 20
Yeast Kg 5.55 180 998 0.195% 1.68 2 2
Sugar Kg 69.34 60 4,160 2.441% 33.60 25 25
Salt Kg 5.55 8 44 0.195% 3.60 2 2
Chicken Kg 970.70 275 266,943 34.180% 480.00 350 350
Onion Kg 346.68 40 13,867 12.207% 720.00 125 125
Masala Kg 138.67 84 11,648 4.883% 84.00 50 50
Cheese Kg 277.34 800 221,875 9.766% 180.00 100 100
Mayonnai Kg 138.67 90 12,480 4.883% 120.00 50 50
se &
Ketchup
Mix Kg 416.02 80 33,281 14.648% 120.00 150 150
Vegetable
Snacks
Per Piece
Fresh Cream
Cakes
Pay back period is shown as 3.52 years Approx. which told that project will expected to cover its
initial investment in three and half of years
Net present value
year Discounted CashF Cum ulative
0 150000 150000
1 355435.4435 505435.4435
2 286907.3193 792342.7628
3 489296.1805 1281638.943
4 685356.1779 1966995.121
5 872181.5107 2839176.632
Discounted payback shows as 4.02 years which means the project will cover its initial investment
in less then 4 year if we disount the cash flows.
Net present value is 839176 which is in positive it shows that it will cover the investment with in
estimated time limit.
Profitability Index
P.I=NPV-Io/Io
Profitability Index is 1.41rupees which means that the project will give 41 paisas on investing of
one rupee.
IRR 22%
IRR is 22% which shows that project will expected to give return of 22% on investment.
Weighted Average Cost of capital
S.d 0.743650456
Variance/Covariance
0.025170668
Method
Slope 0.025170668
Beta 0.058462861
Rf+risk Premium0.118462861
Interpretation : The weighted cost of capital is 11.84% which is twice then Risk free rate. So it seem to
more attractive for investor to invest in this project.