Feasibility Study of Indoor-Hydroponics Farming in the Production of Lettuce and

Spinach

I. Introduction
The demand for more organic and natural products have more than the past several
years increased due to environmental awareness, trends set by young consumers and the
willingness to stay healthy and live longer (Delventhal, 2020). Consumers want transparency
in their purchases wherein they are knowledgeable of where the products came from and
what ingredients are in the mix. This level of consciousness is justified by the fact that there
is far more junk that is available and processed food produced in the market than there is of
healthy and organic produce that one has to make a conscious choice of staying healthy and
having a balanced diet.
In the Philippines, it is known that farmers face a constant uphill battle. They have
the most vulnerable livelihood because the Philippines has a tropical climate, it is frequent
that natural disasters (i.e. storms and floods, el nino) come and go. These extreme weathers
are not only unpredictable and catastrophic, but it also disrupts crop productivity not to
mention implementing policies (i.e. rice tariffication law) that further harm the agricultural
sector. Moreover, a key goal for the Philippine government is to sustain agricultural
production growth to help achieve inclusive growth and poverty reduction (Rosegrant, Perez,
Pradesha, & Thomas, 2016).
Metro Manila in particular, according to 2019 statistics, is the world’s most densely
populated city (Leavy, 2019). And to think of occupying a plot of land to plant on and
eventually harvest with, compared to the province, is almost impossible because of
surrounding buildings, houses, subdivisions and settlement areas. In addition to population
density in Manila, agriculture is the most significant activity that contributes to soil erosion--
wearing a way of a field’s topsoil. Moreover, there is a need to come up with a way to be able
to grow organic and natural produce in urban areas like Metro Manila without having to take
up much space and in doing so avoiding soil erosion altogether. Hence, the proponents of this
study introduce Hydro-Farmily--a business that provides an alternative for growing organic
produce in urban areas.
Resh (1997) defines hydroponics as an alternative technique in which the soil is
replaced by an aqueous solution containing only the mineral elements required by vegetables.
According to Furlani (1998), plants grow in cultivation channels through which nutrient
solution circulates intermittently at defined intervals and is controlled by a timer, using their
own hydroponic cultivation profiles.
Lettuce (Lactuca sativa L.) is the vegetable used on a larger scale in hydroponics, also
known as NFT (Nutrient Film Technique) or laminar flow of nutrients technique. This is
consistent with Ohse et al. (2001), who state that hydroponics is an easy adaptation system
that has demonstrated high performance and cycle reductions when compared to growing in
soil. In 2012, lettuce and chicory yielded more than 24,946Mton and 223,487Hg/ha in the
world. Asia accounted for 57.1 percent of total production, while the Americas accounted for
24 percent, Europe accounted for 16.8 percent, Africa accounted for 1.3 percent, and Oceania
accounted for 0.9 percent. China, the United States, Spain, and Italy were the primary
producers. The main countries that delivered were Belgium-Luxembourg, Kuwait, Congo,
Austria, and the United States (FAOSTAT, 2014).
 Spinach is a popular vegetable in the tropics of Southeast Asia, as well as in Japan,
Australia, and some parts of Africa. Water spinach (Ipomoea aquatica) is thought to be
indigenous to Africa, Asia, and the southwestern Pacific Islands. Since at least A.D., herbs
have been used as a medicinal vegetable in southern Asia. Since 300 B.C., and possibly since
200 B.C.
II. RATIONALE
It is recommended for urban areas where having a garden is not possible. Its space-
efficient design makes it ideal for setting up a garden wherever you like using old containers
around your house for your container garden is a cost-effective and environmentally-friendly
way to grow your plants. Common for people with yards, small patios, or balconies. Growing
plants for food or beauty in different types of containers -buckets, old tires, raised beds,
window boxes, kiddie pools, barrels, and shoes - is known as container gardening. Creating
container gardens for urban birds is also a great idea.
The Philippines, however, is still in its "seedling" stage, compared to other more
developed countries. Therefore, the number of choices available in more advanced countries
is far greater than those in the Philippines if I search online for organic or garden suppliers.
As well, the Philippines lacks good quality garden supplies and a variety of seed varieties.
The supply of hybrid seeds suitable for urban settings is limited, particularly dwarf varieties
best suited to pots. Most organic fertilizers and pesticides are not yet available in retail stores,
but a few suppliers of good-quality organic fertilizers. The majority of neighbourhood garden
suppliers specialize in landscaping services and ornamental plants.
III. ENTERPRISE
The enterprise is located at Barangay Matatalaib, Tarlac City, Tarlac. The business
are focuses on Indoor Hydroponic, which are the specific products are spinach and lettuce.
The researchers create a project to grow more spinach and lettuce even without planting in
the ground or soil.

IV. OBJECTIVES
A. General Objective
The objective of this study is to determine the feasibility of Indoor Hydroponic
Farming for Lettuce and Spinach.
B. Specific Objectives
 Determine the sustainability of Indoor-Hydroponics farming as compared to
the traditional way of farming.
 .To project a system for producing hydroponic lettuce and spinach.
 To increase the income of the enterprise.

BUSINESS/BRAND NAME
The prefix “hydro” was shortened from the word “hydroponics” which is a method of
growing plants without the use of soil. In an article where hydroponics is broken down,
Woodard (2019) explains, “This [hydroponics] system fosters rapid growth, stronger yields,
and superior quality.
 When a plant is grown in soil, its roots are perpetually searching for the necessary
nutrition to support the plant. If a plant’s root system is exposed directly to water and
nutrition, the plant does not have to exert any energy in sustaining itself. The energy the roots
would have expended acquiring food and water can be redirected into the plant’s maturation.
As a result, leaf growth flourishes as does the blooming of fruits and flowers.” Moreover,
Hydro-Farmily not only markets to individuals and households, but to restaurants and
supermarkets as well, thanks to its accessibility. After all, the main goal is to organically
build healthy relationships that grow together as one big, happy Farmily.

MISSION
. To use hydroponics as the primary method to grow and provide fresh, organic, and
affordable agricultural produce with little to no environmental impact such as the use of
pesticides, herbicides, or genetically modified seeds.
VISION
To use innovation and sustainable eco-friendly materials to provide food security for
every individual.
SIGNIFICANCE OF THE STUDY
The accomplishment of this undertaking are deemed beneficial to the following:
Potential Entrepreneurs and Businessmen
This study hopes to encourage potential business venturers to think out of the box and
determine what needs in the market are still not being met and motivate them to be
creative and innovative especially in this day and age where consumers are looking
for something different. And to assist those businesses who plan to enter the food
industry to choose the better alternative.
Local Farmers
This study also hopes to encourage local farmers to explore different ways in which
they can use what resources are available to them and turn it into an addition to their
livelihood. And to also bring an awareness about the potential market of indoor-
hydroponics farm systems as businesses in agricultural crops and cuisine industries
Teachers and Students
This would serve as a reference material for future studies particularly those in the
field of business and agriculture.
Future Researchers
This study helps in creating a frame of reference regarding the utilization of a
hydroponics system as means of growing organic vegetables and to hopefully be an
answer to some of their possible questions with this application.

SCOPE AND DELIMITATION

The scope of this study is focused on the inner workings of a hydroponics system and
be able to determine if there is a potential market for this mode of growing fresh, local and
organic produce, and whether or not it is sustainable as a business venture and an alternative
to traditional farming. This study is limited to urban areas particularly Tarlac City, Tarlac,
Philippines.
REVIEW OF RELATED LITERATURE
The Philippines as an agricultural country is rich in soil and vegetation. Due to its
population, some areas are congested thus no longer have areas for plantations. This year, the
country is continuously experiencing a dramatical state of calamity because of covid-19
which affects the livelihood of many people and this is one of the factors why in this study
sparks the idea of “Indoor-Hydroponics”. A protocol from the government to fight the
pandemic was a community quarantine, consequently, people have a limited access to
resources. This section of the study includes ideas, literature, synthesis about hydroponics
and reviews are as follows.
“Indoor-Hydroponics” is a type or technique of agriculture, it is more efficient and does
not need a wide range of soil or hectares of land. As agribusiness, this way of cultivating
crops and vegetation is profitable. Hydroponics can produce crops and vegetables such as
lettuce without the means of high costs (Sarian, 2020). Hydroponics can be done in recycled
materials that is the reason why it is efficient, it does give production of vegetation and can
help the environment from plastic bottles.
Although “Indoor-Hydroponics” is not able to meet the demands in the market, it is
suitable for small or bigger households (Sarian, 2020). Because of the advantages of growing
vegetables the hydroponics way, a lot of enterprising people are now considering
hydroponics farming as their full time project. (Sarian, 2020). Ensuring the quality and
freshness of vegetables, hydroponics is commendable for its purpose. It can produce arugula,
basil and kale at 18 degree celsius. Hydroponics minimizes food miles and logistics. There
are high-tech challenges as to the use of pesticides, electricity and chemicals (Tan, 2020).
Legally, “Indoor-Hydroponics” or “Hydroponics” is complicated and probably
challenging, due to lack of firm and defined regulations. This type of business has
indeterminable legal basis because this type of agribusiness can be done in undeveloped
small spaces and rentals, although this agribusiness will provide private funding, initial
startup for branching out hydroponic and profits. (Hoops, Olshansky, Rosen & Tavares,
2018).
When it comes to pitting hydroponics vs. soil, hydroponics offer a whole lot more than a
dirt-free way of bringing up your usual crops. Hydro grows help increase yields while saving
growers time, money, and effort, all while helping you kiss soil (and the problems it brings
with it) goodbye, for good. (Rimol, 2017).
No matter how you look at it, hydroponic growing looks more and more like the way of
the future - not only environmentally-friendly, but more economical than traditional methods
for better and more consistent results. And best of all, new and affordable hydroponic
systems make hydroponic growing open to any and all willing to give it a go, and many of
those who make the switch find the benefits and long term profitability far outweigh the cost
to get started. (Rimol, 2017)

V. WHAT ARE THE ALTERNATIVES

The location where the Hydro-Family is situated in is very feasible for Indoor-Hydroponics
farming and production business considering the good quality of buyers in the City of Tarlac.
The market of the product will be in Tarlac City, Pampanga, Pangasinan and other
neighboring provinces.
The Indoor-Hydroponics owned 500 square meter for growing and production of Lettuce and
Spinach. The Lettuce and Spinach produced will supply the 50% of lettuce and spimach
products in the market of Tarlac City and other neighboring provinces.

VI. THE PROJECT

The Production
The hydro-family will engage in growing and production of Lettuce and Spinach with the use
of Indoor-Hydroponics system. There will be twelve cropping seasons.
The Nutrients Solution for Growing
The nutrient solution is managed by following these procedures:
1. Fill the tank with clean water and run the system for about an hour to check for leaks and
whether the float switch is functioning properly. Remove the water from the tank to make
sure that the system will start with fresh and clean solution. Fill the tank again with 49 liters
of water.
2. Mix 0.5 liter of Solution A and 0.5 liter of solution B for every 49 liters of water to make a
50-liter solution in the tank. Water from the tap is normally chlorinated and should be
allowed to stand for a night to volatilize. Rainwater, when properly harvested, is a better
option.
3. Monitor the quality of nutrient solution. The electric conductivity (EC), pH, temperature
and dissolved oxygen (DO) should be maintained at optimal level. EC ranges from 1.0 to 1.3
mS/cm, pH from 5.8 to 6.8, and DO of greater than 5 ppm. When pH is high, suitable amount
of sulfuric acid (H2SO4) is added to bring it down while potash is added to bring the pH up.
The nutrient solution is indeed the heart of hydroponics. Maintaining its quality will define
the success and failure of any system.
Marketing
The enterprise hydro-family will produce the premium quality of lettuce and spinach mainly
in Tarlac City, Pampanga, Pangasinan other neighboring provinces. All lettuce and spinach is
marketed as a fresh products.
VII. MARKET STUDY
According to Statisca Research Development, In 2019, the annual per capita production index
of cabbage (including lettuce and spinach) in the Philippines was about 104.6 percent, higher
than the base year 2018. The cabbage production in the country has been decreasing over the
past years apart from the slight increase in 2019.
VIII. Technical Study
Indoor-Hydroponics Farming for Lettuce and Spinach
 Hydroponic Crops can be Grown in greenhouse instead of large fields improves the
water use efficiency when growing fresh produce. A study was done to assess the growth
yield profitability of Lettuce and Spinach grown in a simple recirculating hydroponics
System.
The Production
Lettuce (Lactuva Satuva) and Spinach is one of the most grown hydroponic vegetable. It
requires green house with the ability to provide adequate heat in winter months and either
shading or chilling for water in the summer months. Leaf varieties reach maturity in 30 days
but can be harvested as soon as they reach the desired size. Other types of lettuce require 6 to
8 weeks to reach full harvest size
Depending on the time of year and whether you are growing inside or outside are key factors
to consider. Spinach is a COOL SEASON crop, so you’ll want to avoid extreme heat which
can cause it to bolt (go to seed and become bitter). Hydroponic spinach typically grows in
around 52 days, or 6 weeks, then it’s is ready to eat.
IX. Organizational and Management Study Duties and Responsibilities Function
This Business organization need a suitable material for Building our indoor-
hydoponic farming for lettuce and spinach.

Supervisory

Board

Board of
Risk Management
Directors

Compliance and
Corporate Affairs
Anti- Money
Laundering

Internal Audit

Sales
Investing Department Operations
 Fund Back Office
Management

Portfolio Accounting
Management

FUNCTION AND DUTIES

Board of Directors
The board of directors, including the general manager or CEO (chief executive
officer), has very defined roles and responsibilities within the business organization.
Essentially, it is the role of the board of directors to hire the CEO or general manager of the
business and assess the overall direction and strategy of the business.
1) Recruit, supervise, retain, evaluate and compensate the manager. Recruiting, supervising,
retaining, evaluating and compensating the CEO or general manager are probably the most
important functions of the board of directors
2) Provide direction for the organization. The board has a strategic function in providing the
vision, mission and goals of the organization. These are often determined in combination
with the CEO or general manager of the business.
3) Establish a policy based governance system. The board has the responsibility of
developing a governance system for the business
4) Govern the organization and the relationship with the CEO. Another responsibility of the
board is to develop a governance system. The governance system involves how the board
interacts with the general manager or CEO.
5) Fiduciary duty to protect the organization’s assets and member’s investment. The board
has a fiduciary responsibility to represent and protect the member’s/investor’s interest in the
company. So the board has to make sure the assets of the company are kept in good order.

Corporate Affairs
1. Administers The Act And Regulates, As Well As, Supervises The Formation And
Incorporation Of Companies
Stipulates the functions, roles, responsibilities and activities assigned to that Act that led to
the establishment or formation of organizations and companies and every establishment
formed, must be done in accordance with the Act.
2. Supervises and Manages Formation Of Companies And Winding Up Of Companies
to make sure that it also involved in the management of winding up of companies and
organizations and the supervision of winding up of these companies.
3. Establishes Companies Registry and Maintains Companies Registry In Every State Of The
Federation

* Risk Management
A typical risk management function includes the steps listed above: identifying risks,
assessing them, forecasting future frequency and severity of losses, mitigating risks, finding
risk mitigation solutions, creating plans, conducting cost-benefits analyses, and implementing
programs for loss control and insurance. For each property risk exposure
*Computing the frequency and severity of losses for each of the property risk exposures
based on loss data
Forecasting future losses for each property risk exposure

Compliance and Anti money laundering

In charge of financial regulations and personal data compliance requirements, making sure
the company’s AML policy corresponds to the international system.
Looking after records of high risk clients and report suspicious activities, if any.

Internal Audit
The role of internal audit is to provide independent assurance that an organisation's risk
management, governance and internal control processes are operating effectively. ... We must
be independent from the operations we evaluate and report to the highest level in an
organisation: senior managers and governors.

Sales
The actual functions of sales management include overseeing what the sales team is doing,
making plans and setting targets. It also includes generally ensuring the efficiency of the sales
process to get the best result for the business.
sales management is to ensure that targets are reached, but targets that are set too high will
never be reached. By running reports on sales figures over a period of time, especially those
produced by current members of the sales team, you’ll be able to calculate the most sensible
and achievable target for individuals and the team as a whole.

Investment Management
"The role of the Investment Management department is to manage Wespath Benefits and
Investments (Wespath) funds in a prudent manner consistent with its fiduciary obligation to
benefit plan participants and institutional clients.

Portfolio Management
* A portfolio manager is one who helps an individual invest in the best available investment
plans for guaranteed returns in the future.
*A portfolio manager plays a pivotal role in deciding the best investment plan for an
individual as per his income, age as well as ability to undertake risks
*Communicate with your client on a regular basis. A portfolio manager plays a major role in
setting financial goal of an individual. Be accessible to your clients.

Operation
*Many business strategies include supply chain configuration, sales, capacity to hold money,
and optimal utilization of human resources.
*This function of operations management is concerned with planning, organizing, directing,
and overall control of all activities within the organization.
 Back Office
*The back office is the portion of a company made up of administration and support
personnel who are not client-facing. Back-office functions include settlements, clearances,
record maintenance, regulatory compliance, accounting, and IT services.
*responsible for providing all business functions related to its operations
*The back office is an essential part of any firm and associated job titles are often classified
under "Operations."

Accounting
* The main functions of accounting are to store and analyze financial information and
oversee monetary transactions. Accounting is used to prepare financial statements for a
company's employees, leaders, and investors. Accounting also functions to ensure the
payment of funds into and out of a company.
*Accounting creates a fiscal history for any company. It is used to track expenditures from
business operations as well as a company's profits
*It can also be utilized to predict financial success and the future needs of a company to
create budgets and take advantage of new growth opportunities.

X. LETTUCE AND SPINACH PRODUCTION AND TRADING COMPONENT

The Hydro-Family enterprise ventures into lettuce and spinach production. It requires
2,240,400 cubic meter of water in total and 0.5 liter of Solution A and 0.5 liter of solution B
for every 49 liters of water to sustain the growth of the lettuce and spinach.
Production and Trading Components of Lettuce and Spinach
Table 1 Procured of Materials Used in Hydro-Family
Materials Units Quanti Quanti Unit Cost Annual Annual
ty per ty Price (Php) Depreciati Repair
Unit (Php) on Cost and
Maintenan
ce Cost
Kiln Dried 180 2 66 126 8,316
Woods cm 2 66 115 7,590
100 2 66 115 7,590 900 2,000
cm 4 112 120 15,840
104.3
cm
140
cm
Nails 3”; 1 33 40 1,320 100 500
3kg
PVC Pipes Lengt 12 396 893 353, 1,500 3,000
h= 838
170
cm;
Width
 = 15
cm
PVC Pipes Lengt 2 66 711 46, 926 1,500 2,000
h=
117
cm;
Width
=7
cm
PVC Flat 15 cm 24 792 77 60, 984 2,500 3,000
Cups
PVC Pipe 90 o 28 924 39 36, 036 1,500 3,000
Elbow
Pipe Coupler 27 cm 10 330 97 32, 010 1,000 2,000
with door
PVC Glue 1 33 75 2,475 50 500
Fill Tube 400 1 33 125 4,125 100 1,000
cm
Electric Air 220 1 33 1000 33,000 1,500 3,000
Pump volts
Air Stone 1 33 220 7,260 200 1,000
Water Pump 1 33 250 8,250 300 1,000
Tank/ 500 1 33 470 15, 510 1000 1,000
Reservoir gallon
Vehicle Pc 1 2 500,00 1,000,0 200,000 300, 000
0 00
TOTAL ₱ 1,641, ₱ 212,150 ₱ 323,000
(Fixed) 070

Table 2. Construction of Indoor-Hydroponics House (500 square meter)

Materials Quantity Total Description Unit Price Total Price
Used Required for number of (Php)
1 sq meter quantity
needed
Cement 0.4 bags 200 Bags 275.00 55,000. 00
Sand 1.8 900 Kilograms 50.00 45,000.00
Aggregate 1.35 675 Kilograms 89.00 60, 075.00
Steel 4 500 Pcs 299.00 149,500.00
Paint 0.18 90 Liters 109.00 9,810.00
Tiles 1.45 725 Pcs 38.00 27,550.00
Roofing 1.3 650 Pcs 105.00 68,250.00
Total 415,185.00
Table 3. Procured of Planting Materials
Raw Unit Quantity Unit Price Cost (Php)
Materials (Php)
Net Cup 3” 1120 12 13,440
Expanded 3 kg 33 600 19,800
Clay Pebbles
Coco Peat/ 5kg 33 200 6,600
coco coir
Snap 500 ml 35 350 115,500
Solution
Lettuce 200 grams 560 300 168,000
Seeds
Spinach 200 grams 560 400 224,000
Total P 547,340

Total Initial ₱ 1,943,560

Investment
Cost

Labor Works
Table 4. Labor Works Expenses
Labor Number of Days Description Wage Total
Employee (per day)

Mason 5 15 days Hired 580 43,500.00

Laborer 10 15 days Hired 580 87,000.00
Total 130,500.00

Potential Income
The average harvest of twelve production cycle was presented in Table 6,shows that
the Indoor-Hydroponics can accommodate a total of 560 cups of Lettuce and 560 cups of
Spinach. Lettuce was grown for 30 days while Spinach grown for 21 days. The harvest was
sold for ₱ 150 per kg. The average yield per plant has 48 grams and the total yield is 3,000 kg
thus amounted to Potential Gross Income per cropping of ₱450,000 and has a Potential Gross
Income per year of ₱5,400,000.
Table 5. Potential Income of Hydro-Family
Crop Grown Lettuce and Spinach
Growing Periods 12 (twelve)
Potential Production
Total Area: 500 square meter
Number of cups 1120
Maturing days Lettuce (30 days) Spinach (21 days)
Average yield per plant 48 grams
Total yield 3,000 kg
Unit price per kg ₱ 150
Potential Gross Income per season ₱ 450,000
Potential Gross Income per year ₱5,400,000

Cost of production
The cost of production, which is composed of total fixed and variable costs, was
tabulated in Table 7. Item under total fixed cost is the depreciation and repair and
maintenance of the materials used in the production of Indoor hydroponics. Depreciation
computed was 212,185 per year, while the repair and maintenance (R&M) costs were ₱
323,000 and other inputs for seeds, labor, fertilizers, chemicals, electricity and other
miscellaneous expenses made up the total variable cost of ₱ 1,339,913 annually. From these
values, it is interesting to note that, with 560 net cups of lettuce and 560 net cups of spinach
in the Indoor-Hydroponics measuring 500 square meter, the plant density is about 48.6 hills
per square meter per cropping or about 1,500 kg of lettuce per square meter and 1,500 kg of
spinach, annually. This is equal to annual gross income of about PhP 5,400,000 or PhP
450,000 per cropping season when multiplied by the selling price PhP 150.00 per kilogram.
Table 6. Cost of Production
Fixed Cost Php/yr
Depreciation 212,150
Repair and 323,000
Maintenance
Variable Cost
Construction of
Indoor- 415,185
Hydroponics
House
Production and 2,176,150
Trading
 Components
Indoor- 1,339,913
Hydroponics cost
for 500 square
meter (seeds,
nutrition of/in
water, power,
hired labor,
workers)
Total 4,466,398

Power Consumption
Power Consumption in the Indoor-Hydroponics
Power Consumption= 4 Kw/hr
Operation= 24 hours a day
= 30 days a month
= 12 months
#of hours in the operation and power consumption in the Indoor-Hydroponics
12 x 30 =360
24 x 360 =8640
Table 7.Expenses on Power Consumption
Consumption Number of Total Power Rate per Kw Total
Rate (Kw/hr) Power Consumption (Php)
Consumption (Kw/Yr)

4 8640 34,560 7.96 275,097.00

Total 275,097.00

Water Consumption
Water Consumption in the Indoor-Hydroponics
260ft^3/month x 12 months= 3120 ft^3 -convert into cubic meters =88.349 cubic
meters
24 hours x 360 days =8640
Table 8. Expenses on Water Consumption
Consumption Number of hours Water Rate per m^3 Total
Rate (ft^3) of Total Water Consumption (Php)
Consumption (m^3/yr)
 260 8640 2,246,400 0.19 426,816
Total 426,816

Hired Workers
Number of Number of Wage Total Number of Total Wage (per
Workers Working Days (per/person) Working Days of year)
per person all Workers
13 240 580 3120 1, 809,600
Total 1,809,600

20 x 12=240
13 x 240=3140 days of all 13 workers that needs to be paid.

The Hydro-Family will take a PhP 5,000,000 loan in a bank for the initial investment of the
enterprise. These are the Summary of Expenses of Hydro-Family and the cashflow.
Summary of Expenses
Year 1 Year 2 Year 3 Year 4 Year 5
Construction 415,185 - - - -
Procured of 1,641,070
Materials
Annual 212,150 240,150 260,000 300,000 320,000
Depreciation
Cost
Annual 323,000 300,000 320,000 360,000 400,000
Repair and
Maintenance
Procured of 1,943,000 - - - -
Planting
Materials
Labor Works 130,000 - - - -
Hired 1,809,000 1,809,000 1,809,000 1,809,000 1,809,000
Workers
Power 275,097 298,100 301,150 305,300 310,500
Consumption
Water 426,816 439,150 435,155 440,500 460,176
Consumption
Potential 5,400,000 5,580,000 5,760,000 5,940,000 6,120,000
Income

Cash Flow

Year Benefit Cost Cash Flow Net Cash Flow

0 -5 400 000 -5 400 000
 1 5 400 000 5 366 518 33 482 -5 366 518
2 5 580 000 1 268 400 4 311 600 -1 054 918
3 5 760 000 1 316 205 4 443 795 3 388 877
4 5 940 000 1 40 5800 4 534 200 7 923 077
5 6 120 000 1 490 675 4 629 325 12 552 402

The economic analysis

Four basic methods were used to assess the financial feasibility of the unit of PhP 5,
000,000.00 Indoor-Hydroponics system. These methods are payback period, return on
investment, benefit/cost ratio and net present value.
1. Payback Period

Payback period (PP) was computed using the formula:

PBP= (Last year with a negative NCF)+((Absolute Value of NCF in that year)/(Total Cash
Flow in the following year))
=2+|-1,054,918/4,743795
=2.2 years
Using the formula above, the project requires only 2 years or 2 months.

2. Benefit/Cost Ratio (BCR)

Benefit-cost ratio (BCR) is a ratio of discounted benefits to discounted costs. It is an accepted

procedure for making go/no-go decisions on projects as compared to alternatives. If the value
of BCR > 1.0 the project is feasible.
BCR = Benefits/Costs, you can get the BRC by using the formula below.
=BCR= |PV [Benefits] |/|PV [Costs] | = (∑_(t=0)^N▒|〖CF 〗_t [Benefits] |/〖(1+i_t)〗^t
)/(∑_(t=0)^N▒|〖CF 〗_t [Costs] |/〖(1+i_t)〗^t )
PV (Benefits) =5,400,000/(1+.12)^1+....
PV (Benefits) = 20,617,254.38
PV (Costs) =5,366,518/(1+.12)^1+...
PV (Costs) =13,878,803.71
BCR= 20,617,254.38/13,878,803.71
=1.48
BCR> 1.0, therefore, the project is feasible.
 3. Return On Investment (ROI)
We can calculate ROI by using the formula:

ROI= (Net Return on Investment)/(Cost of Investment) ×100% OR= (FVI-IVI)/COI

×100%
=28,800,000-5,000,000/5,000,000 x 100%
=4.76 or 47.6 %
4. Net Present Value
NPV= ∑_(t=0)^T▒〖(CF_t)/((〖1+IRR)〗^t )= CF_0+ (CF_1)/((〖1+IRR)〗^1 )+
(CF_2)/((〖1+IRR)〗^2 )+⋯+ (CF_T)/((〖1+IRR)〗^T )〗
= - 5,400,000+33,482/(1+.12)^1...+
=13,175,620.61
5. Internal Rate of Return
NPV=0= ∑_(t=0)^T▒〖(CF_t)/((〖1+r)〗^t )= CF_0+ (CF_1)/((〖1+r)〗^1 )+ (CF_2)/((〖1+r)〗^2 )
+⋯+ (CF_T)/((〖1+r)〗^T )〗
=48.49%

XI. MODE OF FINANCING

The Hydro-Family will borrow in a bank to provide the needed funds to form the
capital of the partnership to sufficiently launch the business. The company will borrow a total
of ₱5,000,000.00 from the bank which will be enough to sustain not only the initial
investment costs during the first year, but also the potential start-up losses of the business.

Borrowed 5,000,000.00 with 12% interest rate in 5 years.

Given: P= 5,000,000
r=12%~0.12
t=5 years
I=Prt

5,000,000 x 0.12 x 5 years

I= 3,000,000 in 5 years.
600,000 annually.
XII. Summary
The summary of the computation is tabulated in Table 5. A payback period of 2.2
years connotes that 25 cropping seasons are needed to recover the investment of PhP5,
000,000.00. A return on investment of 47.6 % and a 3000 kg indicates that the project only
needs to produce this yield per year in order to be in a no-profit-no-loss scenario. This also
suggests that as the project produce more,the more will be the income. A benefit cost ratio of
1.48 means that the project is feasible. It indicates that for every PhP 1.00 investment means
a return of PhP1.48. The net present value also suggests that the project is highly feasible.

Table 5. Summary of computations of economic criteria

Indicator

Gross Income Php 5,400,000

Annual Expenditures Php 4,466,394
Net Profit Php 17,952,402
Benefit Cost Ratio (BCR) 1.48
Payback period (yr) 2.2
Return on Investment (ROI) 47.6 %
Internal Rate of Return (IRR) 48. 49%

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