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Financial Modeling for the Social Sector

05+000Assignment 4

- Insert your work from previous assignment

- Insert your assumptions and responses

- Calculated by formula
Example Scenario Scenario Scenario
INVESTMENT COSTS (per OPERATIONAL UNIT)
(1)= (e/f) Start-up Working Capital Costs (per Month) 5,330,508 4,806,431 4,584,042 4,595,271
(a) Operational Unit's monthly HR cost 19,322,034 23,184,300 27,670,282 33,262,172
(b) Operational Unit's monthly General Operating cost 2,000,000 2,450,000 2,890,000 3,500,000
(a+b) Operational Unit's Total Start-up Working Capital 21,322,034 25,634,300 30,560,282 36,762,172
(d)= (a+b)/2 Average Monthly Start-up Working Capital 10,661,017 12,817,150 15,280,141 18,381,086
(c) Number of Months expected for a new operational unit to reach its steady-state 18 18 18 18
(e)= (c*d) Total Start-up Working Capital Costs (during the start-up period) 191,898,305 230,708,700 275,042,540 330,859,544
(f) Number of Months of investment/Loan Period 36 48 60 72

(2)= (m/f) Cost of Funds (per Month) 1,080,074 1,029,756 1,035,989 1,092,619
(g) Operational Unit's total capital asset costs (Note: not depreciation cost) 7,500,000 7,500,000 7,500,000 7,500,000
(h) Operational Unit's Start-up Working Capital costs (calculated as 'e' above) 191,898,305 230,708,700 275,042,540 330,859,544
(k)= (g+h) Total Investment Funds required 199,398,305 238,208,700 282,542,540 338,359,544
(i) Risk Free Rate (%) 7.50% 7.75% 8% 8.25%
(j) Risk Premium (%) 12% 13% 14% 15%
(l)= (i+j) Required Rate of Return/Rate on Investment (ROI) 20% 20.75% 22% 23.25%
(m)= (k*l) Total Cost of Funds 38,882,669 49,428,305 62,159,359 78,668,594
=(f) Number of Months of investment/Loan Period 36 48 60 72

(3)= (n+o)/(1-p) - (n+o) Tax Costs (per Month) 2,493,004 2,269,629 2,185,568 2,211,958
(n)= (e/f) Operational Unit's Monthly Start-up Working Capital Costs (calculated as '1' above) 5,330,508 4,806,431 4,584,042 4,595,271
(o)= (m/f) Operational Unit's Monthly Cost of Funds (calculated as '2' above) 1,080,074 1,029,756 1,035,989 1,092,619
(p) Tax rate (%) 28% 28% 28% 28%
(A)= (1+2+3) Investment Costs for Operational Unit 8,903,587 8,105,816 7,805,600 7,899,848
INVESTMENT COST (for HEAD OFFICE)
(4)= (E/f) Start-up Working Capital (per Month) 8,211,016 10,477,500 14,976,387 22,624,919
(A) Head Office's monthly HR cost 32,344,064 55,280,001 99,122,581 180,249,355
(B) Head Office's monthly General Operating cost 500,000 600,000 720,000 750,000
(A+B) Head Office's Total Start-up Working Capital 32,844,064 55,880,001 99,842,581 180,999,355
(D)= (A+B)/2 Average Monthly Start-up Working Capital 16,422,032 27,940,000 49,921,290 90,499,677
=(c) Number of Months expected for a new operational unit to reach its steady-state 18 18 18 18
(E)= (c*D) Total Start-up Working Capital required to reach steady-state 295,596,573 502,920,008 898,583,226 1,628,994,194

(5)= (M/f) Cost of Funds (per Month) 4,309,481 4,335,540 5,128,138 6,874,877
(G) Head Office's total capital asset costs (Note: not depreciation cost) 500,000,000 500,000,000 500,000,000 500,000,000
(H) Head Office's Start-up Working Capital costs (calculated as 'E' above) 295,596,573 502,920,008 898,583,226 1,628,994,194
(K)= (G+H) Total Investment Funds required 795,596,573 1,002,920,008 1,398,583,226 2,128,994,194
=(l) Required Rate of Return/Rate on Investment (ROI) 20% 20.75% 22% 23.25%
(M)= (K*l) Total Cost of Funds 155,141,332 208,105,902 307,688,310 494,991,150
=(f) Number of Months of investment/Loan Period 36 48 60 72

(6)= (N+O)/(1-p) - (N+O) Tax Cost (per Month) 4,869,082 5,760,627 7,818,427 11,472,143
(N)= (E/f) Head Office's Monthly Start-up Working Capital (calculated as '4' above) 8,211,016 10,477,500 14,976,387 22,624,919
(O)= (M/f) Head Office's Monthly Cost of Funds (calculated as '5' above) 4,309,481 4,335,540 5,128,138 6,874,877
(B)= (4+5+6) Investment Costs for Head Office 17,389,580 20,573,666 27,922,952 40,971,939
OPERATIONAL UNIT'S TOTAL INVESTMENT COST
(7) Total number of Operational Units at steady state (use the figure from Assignment 3) 10 10 11 11
(C)= (B)/(7) Allocated Head Office Cost (to each Operational Unit) 1,738,734 1,993,074 2,639,060 3,735,677
(A + C) Total Investment Costs that each Operational Unit needs to cover 10,642,321 10,098,890 10,444,659 11,635,525

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Financial Modeling for the Social Sector
Assignment 3

- Insert your work from previous assignment


- Insert your assumptions and responses
- Calculated by formula
Scenario 1 Scenario 2 Scenario 3 Scenario 4
RUNNING COST (per OPERATIONAL UNIT)
(1) Human Resource Cost (per Month) 19,322,034 23,184,300 27,670,282 33,262,172
Salesperson
(c) Operational Unit's monthly customer transaction numbers at steady state 1 1 1 1
(a) - Days available for salespeople for doing sales (per Month) 18 18 18 18
(b) - The number of sales transactions performed each day 4.3 5.2 6.4 8.2
(d) = (a * b) Number of sales transactions per salesperson (per Month) (=client load) 59 59 88 136
(c / d) Number of salesperson required 0.01695 0.01686 0.01134 0.00738
- Wage and benefits (per Month per individual) 19,000,000.00 22,800,000.00 27,360,000.00 32,832,000.00
- Transportation allowance (per Month per individual) - - - -
- Phone allowance (per Month per individual) - - - -
- Other costs (per Month individual) - - - -
(sum) HR cost for everyone in this position 322,034 384,300 310,282 242,172
FACILITATOR
Number of individuals required 3 3 3 3
- Wage and benefits (per Month) 2,000,000.00 2,400,000.00 2,880,000.00 3,640,000.00
- Transportation allowance (per Month) - - - -
- Phone allowance (per Month) - - - -
- Other costs (per Month) - - - -
HR cost for everyone in this position 6,000,000 7,200,000 8,640,000 10,920,000
PROJECT OFFICER
Number of individuals required 2 2 2 2
- Wage and benefits (per Month) 1,000,000.00 1,200,000.00 1,440,000.00 1,700,000.00
- Transportation allowance (per Month) - - - -
- Phone allowance (per Month) - - - -
- Other costs (per Month) - - - -
HR cost for everyone in this position 2,000,000 2,400,000 2,880,000 3,400,000
FIELD STAFF
Number of individuals required 11 11 11 11
- Wage and benefits (per Month) 1,000,000.00 1,200,000.00 1,440,000.00 1,700,000.00
- Transportation allowance (per Month) - - - -
- Phone allowance (per Month) - - - -
- Other costs (per Month) - - - -
HR cost for everyone in this position 11,000,000 13,200,000 15,840,000 18,700,000
(2) Capital Asset Depreciation Cost (per Month) 625,000 625,000 625,000 625,000
Sewing Machine
(e) Number of units 5 5 5 5
(f) Cost per unit 1,500,000 1,500,000 1,500,000 1,500,000
(g) Useful lifespan for this capital asset (in month) 12 12 12 12
(h) = (e * f / g) Depreciation cost on this capital asset 625,000 625,000 625,000 625,000
(3) General Operating Costs (per Month) 2,000,000 2,450,000 2,890,000 3,500,000
General administration costs 1,000,000 1,200,000 1,440,000 1,700,000
Costs of selling or deliverying 500,000 625,000 725,000 900,000
Costs for marketing and advertising 500,000 625,000 725,000 900,000
(A) = (1+2+3) Running Costs for Operational Unit 21,947,034 26,259,300 31,185,282 37,387,172
RUNNING COST (for HEAD OFFICE)
(4) Human Resource Costs (per Month) 32,344,064 55,280,001 99,122,581 180,249,355
Territory Manager
(k) The entire population of the entire geography that the venture eventually aims to serve 7,751 8,000 8,200 8,500
(l) Total population that can be reached by a single Operational Unit 775 775 775 775
(m) = (k / l) Total Number of Operational Unit at steady state 10 10 11 11
(n) - # of days per visit 4.3 5.2 6.4 8.2
(o) - # of visits to each Operational Unit on average (per Month) 1.1 1.3 1.6 2.1
(p) = (n * o) Number of days spent by a territory manager for a vist to a single Operational Unit 4.7 6.7 10.2 16.8
(q) Days available for territory manager to visit Operational Units (per Month) 4 4 4 4
(r) = (m / (q/p)) Number of territory managers required 11.7 17.2 27.1 46.1
- Wage and benefits (per Month per individual) 2,500,000.00 3,000,000.00 3,500,000.00 3,800,000.00
- Transportation allowance (per Month per individual) -
- Phone allowance (per Month per individual) -

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Financial Modeling for the Social Sector
Assignment 3

- Other costs (per Month individual) -


(sum) HR cost for everyone in this position 29,344,064 51,680,001 94,802,581 175,149,355
MONITORING AND EVALUATION
Number of individuals required 1 1 1 1
- Wage and benefits (per Month) 1,000,000.00 1,200,000.00 1,440,000.00 1,700,000.00
- Transportation allowance (per Month) - - - -
- Phone allowance (per Month) - - - -
- Other costs (per Month) - - - -
HR cost for everyone in this position 1,000,000 1,200,000 1,440,000 1,700,000
MARKET SPECIALIST
Number of individuals required 1 1 1 1
- Wage and benefits (per Month) 1,000,000.00 1,200,000.00 1,440,000.00 1,700,000.00
- Transportation allowance (per Month) - - - -
- Phone allowance (per Month) - - - -
- Other costs (per Month) - - - -
HR cost for everyone in this position 1,000,000 1,200,000 1,440,000 1,700,000
PRODUCT SPECIALIST
Number of individuals required 1 1 1 1
- Wage and benefits (per Month) 1,000,000.00 1,200,000.00 1,440,000.00 1,700,000.00
- Transportation allowance (per Month) - - - -
- Phone allowance (per Month) - - - -
- Other costs (per Month) - - - -
HR cost for everyone in this position 1,000,000 1,200,000 1,440,000 1,700,000
(5) Capital Asset Depreciation Costs (per Month) 4,166,667 4,750,000 5,000,000 5,416,667
OFFICE BUILDING 500,000,000 570,000,000 600,000,000 650,000,000
(s) Number of units 1 1 1 1
(t) Cost per unit 500,000,000 570,000,000 600,000,000 650,000,000
(u) Useful lifespan for this capital asset (in month) 120 120 120 120
(s * t / u) Depreciation cost on this capital asset 4,166,666.67 4,750,000.00 5,000,000.00 5,416,666.67
(6) General Operating Costs (per Month) 500,000 600,000 720,000 750,000
General administration costs 500,000 600,000 720,000 750,000
Costs of selling or deliverying - - - -
Costs for marketing and advertising - - - -
(B) = (4+5+6) Running Costs for Head Office 37,010,730 60,630,001 104,842,581 186,416,022
OPERATIONAL UNIT'S TOTAL RUNNING COSTS
(7) Total Number of Operational Units at steady state (see (m)) 10 10 11 11
(C) = (B)/(7) Allocated Head Office Running Cost (to each Operational Unit) 3,700,596 5,873,531 9,908,902 16,996,755
(A + C) Total Running Costs that each Operational Unit needs to cover 25,647,629 32,132,831 41,094,185 54,383,926

Reflections
What have you noticed from this exercise? If you have tried to scenario test suggested in the 'How to use the Template' document, please share your findings here
From this module we understand the concept of 'whole-cost structure' and How to identify the three main components of 'total running costs' and how to estimate them in our project. This
excel template really help us to identify the items of running cost for operational unit and which cost for the head office.

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Financial Modeling for the Social Sector
05+000Assignment 2

- Insert your assumptions and responses

- Calculated by formula

BOUNDING THE OPERATIONAL UNIT Scenario 1 Scenario 2 Scenario 3 Scenario 4


(1) Total population that can be reached by an Operational Unit 7,751 8,000 8,200 8,500
(2) % of that population that are potential target of the operation 10% 12% 15% 20%
(3) =(1) x (2) The size of the potential target market (Available Target Market) 775 960 1,230 1,700
(a) Penetration rate (%) of the product/the service in the market 20% 20% 20% 20%
(b) Market share (%) of your venture at steady state 50% 50% 50% 50%
(4) =(a) x (b) Penetration rate of your venture at steady state 10.0% 10.0% 10.0% 10.0%
(5) = (3) x (4) Operational Unit's customer/beneficiary base at steady state 78 96 123 170
(c) The products intended frequency of use (per Month) 0.04 0.04 0.04 0.04
(d) The product's average repurchase rate by consumers (per Month) 4% 4% 4% 4%
(e) The size of the customer unit 31 38 49 68
(6) = (5) x (c) x (d) / (e) Operational Unit's monthly customer transaction numbers at steady state 1 1 1 1

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