Costs for Planet Karaoke pub

Construction Cost
Repairs and maintenance
Inflows (in Bahts)

770000 to 1000000
10000 p.a.
1
2
3
4

2040000
2040000
2142000
2249100

Repairs and main
Cost of capital

2 5962787.75 % p.a.46 25% of sales 22% of sales equal to depreciation 10000 p. .Costs for beach karaoke pub Construction Cost Other capital investment Revenues (in Bahts) Food and Beverage Other operating costs Annual capital expenditure Repairs and main Cost of capital 800000 to 1200000 900000 1 2 3 4 5 6 4672000 4905600 5150880 5408424 5678845. 10.a.

Year Up Front renovation expenses Rental income Less : Decrease in Net room revenue Less : Depreciation on up front renovation costs Less: Increased Repairs and maintainance expenses Operating profit before tax Taxes @ 30% NOPAT Add: depreciation Free cash flows P. They are merely allocation of overheads.V of cash flows assuming a discount rate of 10.9 Expenses related to utlization of existing toilets.2 230535.1 245117. elevators and carpets for the project have not been considered for evaluatio as they are not incremental cash flows. .75% 0 770000 770000 770000 1 2 3 2040000 2040000 2142000 1650000 1683000 1767125 192500 192500 192500 10000 10000 10000 187500 154500 172375 56250 46350 51713 131250 108150 120663 192500 192500 192500 323750 300650 313163 292325.

4 2142000 1855500 192500 10000 84000 25200 58800 192500 251300 167038.9 1 2 3 4 5 6 13200000 13464000 14137000 14844000 15140000 15443000 en considered for evaluation of the lease agreement .

bar tables.75% 0 800000 900000 1700000 1700000 1700000 Since the growth in covers is limited by the seating capacity and given time of service. Therefore tha anticipated growth in sales in bahts p.a. kitchen set-up and karoke instrument Annual Sales from the bar: Walk-Ins @ 50% Hotel guests @50% Thus total sales Less : Food and beverage costs Less : Decrease in Net room revenue @ 50% of 25% of total patronage Less : Depreciation on up front renovation costs Less: Increased Repairs and maintainance expenses Less : other opearting expenses Operating profit before tax Taxes @ 30% NOPAT Add: depreciation Less : fixed capital investment Free Cash flows P. Labour costs have not been considered in calculation of cash fows as the manpower is internally recruited so it will lead to mere re-allocation of contractual labour costs and not result in incremental outflow .V of cash flows assuming a discount rate of 10. is assumed to be 5% p.a. we assume negligible growth in the cov Since the average check is expected to grow by 5% p.a.Year Initial capital investment: Investment in modern style décor Chairs.

30 1892500.87 1930375.00 2704212.20 1419711.00 4672000.31 283333 283333 655598 355284 1 13200000 .28 717631.00 283333.00 1767125.00 1311813.71 655598.97 283333 283333 502342 333906 5 6 2839422.42 468655.00 623634.33 10000.60 2839422.46 1490696.00 2336000.33 10000.00 2452800.00 5150880.67 187090.73 5962787.73 2981393.33 10000.60 5678845.00 1855500.24 936569.Beach karoke pub 1 2336000.00 1133193.00 1079232.00 2575440.07 200852.00 1352106.02 280970.00 283333.33 10000.67 283333 283333 372979 336775 2 2452800.00 1249345.33 10000.00 283333.65 283333 283333 468656 345003 4 2704212.00 372978.67 159848.00 1650000.00 5408424.00 283333.33 10000.00 1683000.40 436544.62 247186.00 532826.00 1226400.00 1189853.60 669508.00 1027840.24 283333 283333 576768 346165 2981393.00 283333.00 283333.00 1287720.27 283333 283333 436544 355911 assume negligible growth in the covers ernally recruited so it will 3 2575440.39 576768.00 1168000.39 215289.00 4905600.42 502341.94 823954.

2 3 4 5 6 13464000 14137000 14844000 15140000 15443000 .

we have taken that the increase in sales is limited by growth in average check and the growth in cover is ignored due to lim However the same can be better by turning more tables per day. So we recommend using PI There are certain qualifying assumptions for our calculations: 1. .01 years 38. However both give conflicting results. different project life: we should prefer either NPV or PI. 2.54 1.e. there certain risk factors which cannot be quantified like the security concerns. 10.46 years 3.75% because this cost is relevant for all the capital invested in the a Ranking done We believe PI is a better approach as the size of the initial capital investment is different for both the projects and also the tim Pi gives us the return on each baht invested. Also the exact rate of loss of customers due to opening up of a pub is also difficult to estimate. besides the financial flows.999.78% Rs.54 Appropriate discount rate is the cost of the capital i.thus maximizing return per unit of investment.60% 20. 148.0 1 2 3 4 5 6 1 2 3 4 5 6 Decision as per various capital budgeting techniques Free cash flows Planet Karaoke Pub Cash flows Discounted cash flows -770000 -770000 323750 292325 300650 245117 313163 230536 251300 167039 Cumulative Free cash flows Planet Karaoke Pub Cash flows Discounted cash flows 323750 292325 624400 537442 937563 767978 1188863 935017 Planet Karoke Pub Payback period Discounted Payback Period Average ROI IRR NPV PI 2.

69 1. So we recommend using PI d like the security concerns. 336.54% 17. to estimate. .22 Decision Planet karoke Pub Planet karoke Pub Planet karoke Pub Planet karoke Pub Beach hotel Pub Planet Karoke Pub relevant for all the capital invested in the assets.84 years 4. fferent for both the projects and also the time frame for each project is different cting results.35% Rs.833. nd the growth in cover is ignored due to limited capacity of pub.ing techniques Beach hotel Pub Cash flows Discounted cash flows -1700000 -1700000 372979 336775 436544 355911 468656 345003 502342 333906 576768 346165 655598 355284 Beach hotel Pub Cash flows Discounted cash flows 372979 336775 809523 692686 1278179 1037689 1780521 1371595 2357289 1717759 3012887 2073043 Beach hotel Pub 3.95 years 29.

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