REPORT

ON

“FINANCIALPLAN FOR NEW BUSINESS”

Submitted to :
Dr. Tanvi Pathak
Faculty of Management

(In partial fulfilment of Financial Management subject under MBA program of GLS
University)

Submitted by:
NAME ENROLLMENT
Parigna Verma 202000620010713
Suhani Bhatt 202000620010493
Kishan patadiya 202000620010601
Krinali Popat 202000620010619
Neha Thacker 202000620010696
Hemangi Joshi 202000620010745

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 Table of Content

1. Business idea

2. Cost sheet

3. Loan details

4. Cost of capital

5. Operating statement showing EBIT/EPS relationship

6. Operating financial and combined leverage

7. Net present value and internal rate of return

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Business summary :

Orgnico is a a healthy food place which means a small resturant coming up with a pure,
organic and healthy food ingridients to serve its customers. The name of the resturant it self
highlights a main key conecpt behind a business. It offers all the ingridents which are purely
organic, healthy and mainlt domestically made. We have seen that nowdays there are lots and
lots of food chains are opening day by day and serving a best quality food too. Here our
priority is not offering a best food but ours is offering a healthy food. The speciality of
Organico would be the natural, harmless food ingridents we are offering and promosing our
customers a healthy food place for all time. Also food is one of the essential need of humans
and fulfilling this human need in a organic way will make a difference. Thus, Organico will
be a change maker into a society while offering a quality food with natural ingridients. Also
all the infrasturcture would be wood such bamboo based and rather focusing towards a
modern infrasturcture and facilities Organico would be creating a place where things would
be natural and elegent rather than artificial and also keeping minimal touch in a seating and
designing along with the organic food combination. Thus, the main objective behind organico
is to serve a premium food quality products which are organically grown and chemical and
perservation free in nature.

Mission:
Offering a Food options with high level of nutrition such minerals, vitamins along organic
and real food ingridents.

Vision:
To create an awareness towards natural, sustainable, organic options to protect an
environment.

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Concept Generation:
As we all know that there is no harm in being healthy and if we have so many ways to apply
in our day to day life to be close towards Mother Nature. So this was the main thought behind
Organico. Also we are aware that organic food helps to the environment, farmers, and makers
and mainly to the customers. Organico would be using ingredients which are grown without
any use of harmful products or fertilizers. Also it has no risk of toxic element which could be
dangerous for the human body so Organico all served food would be helping towards
preventing an individual from any kind of illness by providing a healthy ingredient food.

Description of a product or a service:

Organico is among the few best restaurants focusing on a healthy, natural and organic food
places. Also we are going to give priority to the domestically produced ingredients which are
chemical are preservative free. The unique point of ours is the quality of the key ingredients
and the right manner of making dish which creates a best combination. Also all the food
recipes are finalized while keeping the health conditions and need and expectations of our
targeted consumers. Along with the healthy and real ingredients for a food we also have
prioritized the techniques and process of making the recipe in a way that we don’t need to
compromise anywhere to deliver the organic and real taste of the key ingredients of a dish to
the customers directly.

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 Cost Sheet of Organico:

1st Month 1st 2nd 3rd 4th 5th

Particulars
exp. Year Year Year Year Year
Direct Raw
Material

furniture
1,00,000 20,00,000 21,06,000 25,02,000 21,08,000 27,50,000
timber 50,000 2,06,000 6,99,000 6,15,000 7,50,000 7,01,000
Food 60,000 40,000 50,000 45,000 40,000 50,000
materi
als
Hand 10,000 2,20,000 2,50,000 2,24,000 2,78,000 2,11,000
gloves
Dish 1,20,000 8,50,000 16,60,000 15,80,000 12,00,000 17,60,000
washe
rs
Floor 45,000 5,00,000 4,80,000 2,00,000 3,15,000 3,20,000
cleane
rs
Real 1,75,000 18,00,000 21,00,000 20,50,000 22,50,000 27,00,000
ingredi
ents
Glass, dishes 3,05,000 24,00,000 240000 21,32,000 26,32,000 29,10,000
Direct Expenses
Fuel gas 75,000 - - - - -
Payroll 30 7,00,000 15,60,000 2,00,000 1,200,000 1,600,000 1,700,000
Electricity 95,000 4,00,000 - - - -
Carriage In. 6000 26,000 25,000 31,000 42,000 45,000
Direct Wages 70,000 2,20,000 700000 1,40,000 6,75,500 6,80,100

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 Prime Cost 18,11,000 8,422,000 8,516,000 10,719,000 10,810,500 13,827,100
Factory
Overhead
Rent 85,000 2,00,000 9,10,000 9,11,000 11,00,000 9,09,000
Electricity 62,000 1,04,000 6,00,000 5,09,870 7,70,824 8,00,906
Insurance 20,000 20,000 28,000 22,000 21,000 27,000
Other utilities 30,000 2,60,000 3,80,000 3,20,000 4,10,000 4,11,000
telephone 3,500 50,000 34,000 50,500 45,000 61,500

Salary 45,000 3,10,000 4,99,000 4,04,000 5,14,000 6,13,443

Factory Cost 2,076,500 9,366,000 10,967,000 12936,370 13,671,324 15,831,849

Admin
Overhead
Wages 30000 2,50,000 2,00,000 2,70,000 2,75,000 3,01,000
and
benefi
ts
Legal advise 10000 15,000 10,000 14,500 20,500 21,000

Cost of Prod. 2,116,500 9,631,000 11,177,000 13,220,870 13,966,824 16,153,849

Selling &
Distribution
advertising
10000 20,000 21,000 31,000 30,000 38,000

Storage units 5,000 1,50,000 1,80,000 2,02,000 2,10,000 3,10,000

Delivery out 15,000 1,20,000 1,00,000 1,75,000 1,70,000 1,85,000

Total Cost 2146500 9,921,000 11,478,000 13,628,870 14,376,824 16,686,849

Profit 864510 12,11,000 13,00,000 14,00,900 15,15,100 17,01,100

Sales 30,11,010 186,32,000 202,78,000 225,29,770 233,91,924 258,87,949

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Points:
 Land for the restaurant would be 1500 sq. ft. Price of the land after necessary
construction would be ₹60,00,000.

 The inflation rate of all the things differ from one another and are based on certain
assumptions.

 The Licensing cost state wise costs Rs. 3000 and Rs. 100 registration cost. We might
add more materials or appliances of Rs. 10,00,000 within the period of 5 years based
on our production and demand of the restaurant.

 It is assumed that our healthy food production would increase which would also have
an effect on costing of the product.

 The restaurant would run for 12 hrs. in a day.

 There are 6 partners and the profit would be divided equally amongst the partners.

 The restaurant is unique with 3 things which are totally organic and eco-friendly., so
the cost sheet shows average prices of all the materials.

 The restaurants food sells for 2-person average is Rs. 800-1000.

Minimum Fund Requirement:

The minimum fund requirement for the business will be ₹16,921,000(Total cost
+land+materials). These ₹16,921,000 will be further financed through borrowed and equity
funds. The loan of ₹4,230,250 (25% of the total fund requirement) will be borrowed from the
State bank of India for the tenure of 15 years @9.6% per annum. For this, required assets will
be hypothecated like land and machineries. Rest of the required funds i.e. ₹12,690,750 (75%
of the total fund requirement) will be financed through equity funds. Here, ₹12,690,750 will
be invested by 6 partners, which comes to ₹2,115,125 amount to be invested by each partner.

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Loan Details:

Loan EMI
₹44,429

Total Interest Payable

₹37,66,958

Total Payment(Principal + Interest)

₹79,97,208

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Cost of Capital:

The total book value of equity shares is ₹12,690,750 with the face value of ₹10 each. Total of
these 1,269,075 equity shares will be equally divided among the partners, each receiving
21,150 equity shares. At the initial stage, the dividend distribution will be ₹10 per equity
share with the growth of 12%. The loan taken from State Bank of India is ₹4,230,250 at the
rate of 9.5% per annum. The tax rate will be 30% as the income surpasses ₹10, 00,000 per
annum.

The calculation for cost of capital is as shown below:

P0 = ₹10 g = 12% D = 1
Therefore, r, i.e., rate of return will be 22%
As the rate of return to shareholders is cost to company the,
Cost of Equity (Ko) = 22%
Interest rate = 9.5% Tax rate = 30%
Cost of Loan (Kl) = 9.215%
The Weighted Average Cost of Capital calculation is as below

Type of capital Book value Weight Cost WACC

Equity 12,690,750 0.75 0.22 0.165

Loan 4,230,250 0.25 0.0922 0.0231

Total 16,921,000 0.1881

As per the shown calculation, the total weighted average cost of capital is 18.81%

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Loan Amortization Table:
Total
Principal Interest
Year Payment Balance
(A) (B)
(A + B)
2021 1,32,785 4,00,362 5,33,147 40,97,465
2022 1,46,108 3,87,039 5,33,147 39,51,357
2023 1,60,769 3,72,379 5,33,147 37,90,588
2024 1,76,900 3,56,247 5,33,147 36,13,688
2025 1,94,650 3,38,497 5,33,147 34,19,038
2026 2,14,181 3,18,966 5,33,147 32,04,858
2027 2,35,671 2,97,476 5,33,147 29,69,186
2028 2,59,318 2,73,829 5,33,147 27,09,868
2029 2,85,338 2,47,809 5,33,147 24,24,530
2030 3,13,968 2,19,179 5,33,147 21,10,561
2031 3,45,472 1,87,676 5,33,147 17,65,090
2032 3,80,136 1,53,011 5,33,147 13,84,954
2033 4,18,278 1,14,869 5,33,147 9,66,676
2034 4,60,248 72,900 5,33,147 5,06,428
2035 5,06,428 26,719 5,33,147 -

As shown in the chart, the total payment (principle+interest) at the end of loan tenure, will be
₹7,997,208. Out of which 47.1% is the principal amount while rest will be the total interest
amount. The EMI will be ₹44,429. Which sums up yearly to ₹5,33,147 ending the loan with
full repayment in 2035.

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 Operating statement showing EBIT-EPS relationship:

Revenue Year 1 Year2 Year3 Year4 Year5

Sales 186,32,000 202,78,000 225,29,770 233,91,924 258,87,949
Operating Exp.
Direct Raw Material 80,16,000 75,85,000 93,48,000 9573000 11402000
Direct Exp. 22,06,000 9,25,000 13,71,000 23,17,500 24,25,100

Direct Wages 2,20,000 700000 1,40,000 6,75,500 6,80,100

Factory overhead 9,44,000 24,51,000 22,17,370 28,60,824 28,22,849
Interest 5,33,147 5,33,147 5,33,147 5,33,147 5,33,147

Admin Overhead 11,64,000 31,51,000 23,57,370 35,36,324 35,02,949

Selling & Distribution 2,90,000 3,01,000 4,08,000 4,10,000 5,33,000

EBIT (Earnings before interest

& tax) 52,58,853 4631853 6154883 3485629 3988804
(Interest) 5,33,147 5,33,147 5,33,147 5,33,147 5,33,147

EBT (Earning before tax) 47,25,706 40,98,706 56,21,736 29,52,482 34,55,657

Taxes 1417711 1229611.8 1686520.8 885744.6 1036697.1

EAT/PAT(Earnings/Profit after
tax) 33,07,995 28,69,094 39,35,215 20,66,737 24,18,960

Cashflow
Equity (-12,690,750)
Final Project Cashflow 33,07,995 28,69,094 39,35,215 20,66,737 24,18,960

EAT/PAT(Earnings/Profit after
tax) 33,07,995 28,69,094 39,35,215 20,66,737 24,18,960

Divide: No. of shares (n) 126,90,750 126,90,750 126,90,750 126,90,750 126,90,750

EPS (Earing per share) 0.26 0.23 0.31 0.16 0.19

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Net Present Value:

Year Cashflows PVIF @5% PVCF

0 12690750 1.001 12690750
1 3307995 0.952 3149211.24
2 2869094 0.907 2602268.258
3 3935215 0.864 3400025.76
4 2066737 0.823 1700924.551
5 2418960 0.784 1896464.64

Net Present value = RS25439644.449

As the Net Present Value is positive, this project will be accepted.

Internal Rate of Return:

As mentioned above, Net Present Value is positive, so the second Net Present Value should
be calculated at higher percentage.

Year Cashflows PVIF @5% PVCF PVIF @ 7% PVCF

0 12690750 1.001 12690750 1.0001 12690750
1 3307995 0.952 3149211.24 0.935 2944515.31
2 2869094 0.907 2602268.258 0.873 2271780.19
3 3935215 0.864 3400025.76 0.816 2774421.02
4 2066737 0.823 1700924.551 0.763 1297805.43
5 2418960 0.784 1896464.64 0.713 1352179.29

Positive IRR occurs when the aggregate amount of cash flows caused by an investment is
more than the amount of the initial investment. In this case, the partners will experience a
positive return on its investment.

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