CHAPTER V

FINANCIAL FEASIBILITY

The financial aspect of the project feasibility study quantifies the results of the

marketing, technical, management, taxation and legal phase of the project study and

expresses in peso terms the possible outcome of operating the project.

Capital Requirement

 Capital Expenditures

GOVERNMENT LICENSE AND FEES

PRICE PER PROJECTED
TYPE QTY SUPPLIER
PIECE EXPENSE
BIR Php5,000.00 1 BIR Php5,000.00
Business Permit Php3,000.00 1 Ormoc City Hall Php3,000.00
Zoning Fee Php100.00 1 Local council Php100.00
Locational clearance Php350.00 1 Ormoc City Hall Php350.00
Fire clearance Php50.00 1 Ormoc City Hall Php50.00
Sanitary permit Php1,500.00 1 Ormoc City Hall Php1,500.00
DTI Php500.00 1 DTI Php500.00
SEC Php7,000.00 1 SEC Php7,000.00
FDA Php5,000.00 1 FDA Php5,000.00

TOTAL Php22,500.00
Table 15.

Table 15 shows all the required government permits and licenses needed to start a

business. Most are rough estimations of the fees from the departments. Total for government

license and fees is Php22,500.00

PRE-MARKETING
PRICE PER PROJECTED
TYPE QTY SUPPLIER
PIECE EXPENSE
Tarpaulin Php250.00 2 pcs KLCA tarpaulin layout & prints Php500.00
Flyers Php2.00 100 pcs KLCA tarpaulin layout & prints Php200.00

TOTAL Php700.00
Table 16.
 Table 16 shows the pre-marketing or advertising expenses of the business which

includes flyers and tarpaulins. A total of Php700.00 is presumed to be spent on the initial

promotion.

 Operating expenditures

REPAIR AND MAINTENANCE

TYPE PROJECTED EXPENSE
Repair and maintenance allowance Php5,000.00
Fuel Php2,000.00
Transportation Php3,000.00

TOTAL Php10,000.00
Table 17.

Table 17 shows a rough estimation of the monthly allowance for repair and

maintenance services, as well as the gasoline expenses for the deliveries and transportation

expense. This brings the total to Php10,000.00 in a month.

UTILITIES
TYPE PROJECTED EXPENSE
Electricity Php2,000.00
Water Php500.00
LPG Php1,500.00

TOTAL Php4,000.00
Table 18.

Table 18 shows the monthly estimation of electricity bills, water bills and LPG

totaling to Php4,000.00

RENT
TYPE PROJECTED EXPENSE
Rent Php5,600.00

TOTAL Php5,600.00
Table 19.
 Table 19 shows the monthly rent of Yumpy Palabok, bringing the total monthly rent

to Php5,600.00

PACKAGING
PRICE PER
TYPE QTY PROJECTED EXPENSE
BUNDLE/PACK
Cardboard box Php120.00 20 Php2,400.00
Wooden fork Php70.00 20 Php1,400.00
Paper bag Php75.00 15 Php1,125.00

TOTAL Php4,925.00
Table 20

Table 20 shows the packaging needed for Yumpy Palabok, estimated total monthly

packaging expense will be Php4,925.00.

SALARIES
POSITION HOURLY RATE DAILY SALARY MONTHLY SALARY
Manager(2) 80 Php640.00 Php33,280.00

Kitchen steward 60 Php480.00 Php12,480.00

Cashier 60 Php480.00 Php12,480.00

Service Crew 50 Php400.00 Php10,400.00
Delivery rider 50 Php400.00 Php10,400.00

TOTAL Php79,040.00
Table 21.

Table 21 shows the total monthly salary of 4 employees of Yumpy Palabok. Kitchen

steward and cashier are hired with an hourly rate of Php60.00. Meanwhile, Service crew and

delivery rider is hired with an hourly rate of 50.00. The owners who will also be the manager

of the business will be given an hourly rate of 80.00. Total monthly salaries will be

Php79,040.00.
 PRE-OPERATING EXPENDITURES
CAPITAL EXPENDITURES
Particulars Projected expense
Government license and fee Php22,500.00
Advertising Expense Php700.00
Cost of building Php8,860.00
Equipment Php99,900.00
Furniture and fixtures Php48,900.00
Kitchen and Dining Utensils Php20,900.00
OPERATING EXPENDITURES
Kitchen Supplies Php6,940.00
Utilities Php4,000.00
Rent Php5,600.00
fuel Php2,000.00
Transportation Php3,000.00
Packaging Php4,925.00
Raw Materials Php15,000.00
Salaries Php79,040.00
Repair and maintenance allowance Php5,000.00
TOTAL CAPITAL REQUIREMENT Php327,265.00
Table 22.

Total estimated capital requirement for Yumpy Palabok includes all the pre-

operating capital expenditures and certain operating expenses, bringing the total to

Php327,265.00

Equity and Credit Needs

Yumpy Palabok, owned by a partnership, will acquire capital through equity and

credit needs. The business partners will provide an initial capital of Php500,000.00 to be

used in the pre-operating period of the business. The partners will provide Php250,000.00

each to meet the capital needed by the business. The equity sources will be the personal

savings of the partners.

Income and Cost Analysis

 Average Monthly Sales

Palabok Selling Price Avg. daily sales Daily Sales Monthly Sales
Size in unit
Small ₱30.00 100 pcs ₱3,000.00 ₱78,000.00
Medium ₱45.00 100 pcs ₱4,500.00 ₱117,000.00
Large ₱75.00 50 pcs ₱3,750.00 ₱97,500.00
Bila-o ₱250.00 20 pcs ₱5,000.00 ₱130,000.00
Total 270 pcs ₱16,250.00 ₱422,500.00
Table 23. Average monthly sales

Assumptions:

 100 pieces of small and medium size will be sold in a day

 50 pieces of large size will be sold in a day

 20 pieces of bila-o size will be sold in a day

 A total of 26 days in a month since the business only operates from Monday to Saturday

 Estimated yearly sales

3 YEARS SALES PROJECTION

Palabok Size YEAR 1 YEAR 2 YEAR 3

Small ₱936,000.00 ₱982,800.00 ₱1,190,700.00

Medium ₱1,404,000.00 ₱1,474,200.00 ₱1,547,910.00
Large ₱1,170,000.00 ₱1,228,500.00 ₱1,289,925.00
Bila-o ₱1,560,000.00 ₱1,638,000.00 ₱1,719,900.00

Total ₱5,070,000.00 ₱5,323,500.00 ₱5,748,435.00

Table 24. 3 Year Sales Projection

Assumptions:

 Sales will increase 5% every year.

 The 3-year sales forecast of Yumpy Palabok shown in the preceding table is a result of
 the forecasted daily sales in units. An average of ₱422,500.00 monthly sales results to

₱5,070,000.00 sales in a year. Sales for each product are assumed to increase yearly by

5%.

Statement of Comprehensive Income

Yumpy Palabok
Income Statement

As the Period as Indicated

Year 1 Year 2 Year 3

Net Sales ₱5,070,000.00 ₱5,323,500.00 ₱5,748,435.00
Less: COGS 239,100.00 251,055.00 263,607.75
Gross profit 4,830,900.00 5,072,445.00 5,484,827.25
Less: Expenses
Supplies Expense 83,280.00 88,276.80 93,573.41
Salaries Expense 948,480.00 995,904.00 1,045,699.20
Repair and maintenance
60,000.00 61,200.00 62,424.00
Expense
Utilities Expense 48,000.00 48,960.00 49,932.20
Rent Expenses 67,200.00 68,544.00 69,914.88
Transportation Expense 36,000.00 36,360.00 36,723.60
13 month pay expense
th
79,040.00 82,992.00 87,141.60
Fuel Expense 24,000.00 24,480.00 24,969.60
Income before tax 3,484,900.00 3,665,728.20 4,014,448.76
Less:Income tax 852,980.00 896,945.64 948,527.75

Net Profit ₱2,631,920.00 ₱2,768,782.56 ₱3,065,921.01

Table 25. Statement of Comprehensive Income

Assumptions:

 Expenses such as Repair and Maintenance, Utilities, fuel and Rent are assumed to

increase by 2% every year.

 Salaries are assumed to increase 5% every year

 Cost of Supplies and transportation expense is subject to a 1% increase every year.

 Only 95% of the available supplies will be used each year.

Amounts in the 3-year projection of Income Statement are from the Sales and Cost of

Sales Projections, Capital Expenditures, and Operating Expenditures. Tax Expense is

computed using 20% tax rate. For the first year of operations, the business is already known,

gaining a net income of Php2,631,920.00. Payback period is more than a year.

Statement of Cash Flow

Yumpy Palabok
Statement of Cash Flow
As the Period as Indicated
Year 1 Year 2 Year 3
Cash Flow from Operating
Activities
Cash sales ₱5,070,000.00 ₱5,323,500.00 ₱5,748,435.00
Payment of Supplies (83,280.00) (88,276.80) (93,573.41)
Payment of Rent (67,200.00) (68,544.00) (69,914.88)
Payment of Utilities (48,000.00) (48,960.00) (49,932.20)
Payment of 13th month pay (79,040.00) (82,992.00) (87,141.60)
Payment of Salaries (948,480.00) (995,904.00) (1,045,699.20)
Payment of tax (852,980.00) (896,945.64) (948,527.75)
Payment of fuel (24,000.00) (24,480.00) (24,969.60)
Payment of transportation (36,000.00) (36,360.00) (36,723.60)
Payment of repair and
(60,000.00) (61,200.00) (62,424.00)
maintenance allowance
Net Cash Flow from
₱2,871,020.00 ₱3,019,837.56 ₱3,329,528.76
Operating Activities

Cash Flow from Investing

Activities
 Purchase of machinery and
(99,900.00) ….………….. ….…………..
Equipment
Purchase of furniture and fixture (48,900.00) ….………….. ….…………..
Purchase of utensils (20,900.00) ….………….. ….…………..
Net Cash Flow from Investing
(₱169,700.00) ….………….. ….…………..
Activities

Cash Flow from Financing

Activities
Investment of Partners 500,000.00 ….………….. 1,000,000.00
Net Cash Flow from Financing
₱500,000.00 ….………….. ….…………..
Activities
Net Cash Flow 3,201,320.00 3,019,837.56 4,329,528.76
Beginning Balance of Cash ….………….. 3,201,320.00 6,221,157.56
Ending Balance of Cash ₱3,201,320.00 ₱6,221,157.56 ₱10,550,686.32
Table 26. Statement of Cash Flow

Assumptions:

 100% of sales will be received in cash and G-cash

 Machinery and equipment last for 5 years

 Furniture and fixtures last for 3 years

 Utensils last for 3 years

 There’s an additional investment of 1,000.000.000 after the first 8 months operation of

the business.

 There are no additional investment in the 2nd and 3rd year of the business

Statement of Changes in Owner’s Equity

Yumpy Palabok

Statement of Changes in Owner’s Equity

As the Period Indicated

Year 1 Year 2 Year 3
 Beginning Capital 3,131,920.00 5,900,702.56
Investment 500,000.00 1,000,000.00
Net Income 2,631,920.00 2,768,782.56 3,065,921.01
Withdrawal ….………….. ….………….. ….…………..
Ending Capital ₱3,131,920.00 ₱5,900,702.56 ₱9,966,623.57
Table 28. Statement of Changes in Owner’s Equity

Assumptions:

 There will be an additional investment in the 3rd year of the business

 No withdrawal perform by the owners in the 3 years operation of the business.

Statement of Financial Position

Yumpy Palabok

Statement of Financial Position

As the Period Indicated
ASSET Year 1 Year 2 Year 3
Current Asset
Cash ₱3,201,320.00 ₱6,221,157.56 ₱10,550,686.32
Prepaid rent 20,160.00 20,563.20 20,974.46
Supplies 83,280.00 88,276.80 93,573.41
Non-Current Asset
Machinery and Equipment 99,900.00 79,920.00 59,940.00
Furniture and fixture 48,900.00 32,600.00 16,300.00
Utensils 20,900.00 13,933.33 6,966.66
Total Assets ₱3,474,460.00 ₱6,456,450.89 ₱10,748,440.85

LIABILITIES
Utilities Payable 3,000.00 5,748.33 6,817.28
Salaries Payable ….………….. 160,000.00 230,000.00
Repair and Maintenance
4,540.00 20,000.00 15,000.00
Payable
Accounts Payable 60,000.00 70,000.00 80,000.00
Tax Payable 275,000.00 300,000.00 450,000.00
 Total Liabilities 342,540.00 555,748.33 781,817.28
OWNER’S EQUITY
Jardin & Dela Penia’s
3,131.920.00 5,900,702.56 9,966,623.57
Capital
Total Owner’s Equity 3,131,920.00 5,900,702.56 1,569,485.12
TOTAL LIABILITIES
AND OWNER’S ₱4,474,460.00 ₱6,456,450.89 ₱10,748,440.85
EQUITY
Table 27. Statement of Financial Position

Assumptions:

 Rent will be paid 30% in advance every year

 Taxes will be paid 40% in advance in the 2nd and 3rd year of the business

 Machinery and Equipment will last for 5 years, the amount in the table for the following

years are depreciated.

 Furniture and Fixtures will last for 3 years, the amount in the table for the following

years are depreciated.

Amounts in Tax Payable, Utilities Payable, Accounts Payable and Salaries Payable are pure

assumptions