Cakes Inside

Biratnagar, Nepal

Financial Feasibility Study Report

of a
Bakery
at
Biratnagar, Nepal
NAME OF THE PROJECT Cakes Inside
Biratnagar, Nepal

MANAGEMENT Denim Jung Shah

Rahul Giri

NATURE OF PROJECT Bakery

Total
Fixed Assets 2,101,600
Working Capital   493,188
TOTAL PROJECT COST 2,594,788

FINANCING PATTERN Total

Equity 40% 1,037,915
Loan 60% 2,095,638

DEBT EQUITY RATIO 2.02

1 2 3 4 5

Total Revenue 3,105,000 6,831,000 7,514,100 8,265,510 9,092,061

Net Profit (213,042) 120,760 210,386 310,245 421,610

Return on Share Capital -20.74% 11.75% 20.48% 30.20% 41.04%

Return on Networth -26.16% 12.91% 18.37% 21.31% 22.46%

BREAK EVEN POINT 112.48% of Capacity

BREAK EVEN SALES 3,492,349

Debt Service Coverage Ratio 1.54 Times

Payback Period 4.55 Years

Internal Rate of Return 3.62%

 Cakes Inside
   
Projected Profit and Loss Account
             
Description 1 2 3 4 5
Sales Revenue
Total Sales 3,105,000 6,831,000 7,514,100 8,265,510 9,092,061

Less: Cost of Goods Sold

Total Direct Cost 1,397,250 3,073,950 3,381,345 3,719,480 4,091,427

Gross Margin 1,707,750 3,757,050 4,132,755 4,546,031 5,000,634

Less: Fixed Cost

Office and Administrative Cost 1,416,000 3,115,200 3,426,720 3,769,392 4,146,331

Profit before Depreciation and Interest 291,750 641,850 706,035 776,638 854,302

Less: Depreciation 321,490 283,292 252,012 226,326 205,179

Depreciation 221,490 183,292 152,012 126,326 105,179
Amortization 100,000 100,000 100,000 100,000 100,000
Profit before Interest (29,740) 358,559 454,023 550,312 649,123

Interest on Loan 183,302 197,545 173,509 136,652 86,976

Profit before Tax (213,042) 161,013 280,515 413,660 562,147

Less: Income Tax (25%) - 40,253 70,129 103,415 140,537

Net Profit after Tax (213,042) 120,760 210,386 310,245 421,610

Previous year's Profit - (213,042) (92,282) 118,104 428,349

Cumulative Profit forwarded to B/S (213,042) (92,282) 118,104 428,349 849,959

Cash Profit 108,448 404,051 462,398 536,571 626,789
Cakes Inside
   
Projected Balance Sheet
               
Description 0 1 2 3 4 5
Sources of Funds  
 
Shareholder's Fund  
Share Capital 1,027,338 1,027,338 1,027,338 1,027,338 1,027,338 1,027,338
Profit & Loss Account - - - 118,104 428,349 849,959
 
Sub Total 1,027,338 1,027,338 1,027,338 1,145,442 1,455,687 1,877,297
Loans  
Working Capital Loan - 986,375 1,193,514 1,312,865 1,444,152 1,588,567
Long term Loan 1,602,450 1,538,352 1,346,058 1,025,568 576,882 -
 
Sub Total 1,602,450 2,524,727 2,539,572 2,338,433 2,021,034 1,588,567
 
Total Sources 2,629,788 3,552,065 3,566,909 3,483,875 3,476,720 3,465,864
 
Application of Funds  
Fixed Assets 1,336,600 1,336,600 1,115,110 931,819 779,807 653,481
Less: Depreciation - 221,490 183,292 152,012 126,326 105,179
 
Net fixed Assets 1,336,600 1,115,110 931,819 779,807 653,481 548,302
 
Current Assets  
Inventory - 232,875 281,779 309,957 340,952 375,048
Debtors - 517,500 626,175 688,793 757,672 833,439
Cash and Bank 793,188 1,306,413 1,616,634 1,815,275 1,965,568 2,084,123
Total Current Assets 793,188 2,056,788 2,524,587 2,814,024 3,064,192 3,292,609
Less: Current Liabilities - 232,875 281,779 309,957 340,952 375,048
 
Net Current Assets 793,188 1,823,913 2,242,809 2,504,068 2,723,239 2,917,562
 
Preliminary Expenditure 500,000 365,000 265,000 165,000 65,000 (35,000)
(to the extent of not written off)  
Profit & Loss Account - 213,042 92,282 - - -
 
Total Application 2,629,788 3,517,065 3,531,909 3,448,875 3,441,720 3,430,864

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 Projected Cash Flow Statement
               
Description 0 1 2 3 4 5

1. Cash Flow from Operating Activities

Net profit/(Loss) before Tax - (213,042) 161,013 280,515 413,660 562,147

Add. Depreciation - 221,490 183,292 152,012 126,326 105,179
Add: Amortization - 100,000 100,000 100,000 100,000 100,000
Less: Income Tax Payment - (40,253) (70,129) (103,415) (140,537)

Cash Flow before change in W. C. - 108,448 404,051 462,398 536,571 626,789

Adjustments for
Decrease/(Increase) in Inventories - (232,875) (48,904) (28,178) (30,996) (34,095)
Decrease/(Increase) in Sundry Debtors - (517,500) (108,675) (62,618) (68,879) (75,767)
(Decrease)/Increase in Sundry Creditors - 232,875 48,904 28,178 30,996 34,095

Net Cash flow from Operating activities - (409,052) 295,376 399,780 467,692 551,022

2. Cash Flow from Investing Activities

Decrease/(Increase) in Fixed Assets (1,336,600) -

Decrease/(Increase) in Pre-operating Expenses (500,000) - - - - -

Net Cash Flow from Investing Activities (1,836,600) - - - - -

3. Cash Flow from Financing Activities

Increase/(Decrease) in share capital 1,027,338 - - - - -

Increase/(Decrease) in Working Capital loans - 986,375 207,139 119,351 131,287 144,415
Increase/(Decrease) in Long Term loans 1,602,450 (64,098) (192,294) (320,490) (448,686) (576,882)

Net Cash Flow from Financing Activities 2,629,788 922,277 14,845 (201,139) (317,399) (432,467)

Net increase in Cash and Cash equivalents 793,188 513,225 310,221 198,642 150,292 118,555
Cash and Cash Equivalents : Opening - 793,188 1,306,413 1,616,634 1,815,275 1,965,568
Cash and Cash Equivalents : Closing 793,188 1,306,413 1,616,634 1,815,275 1,965,568 2,084,123

Calculation of Ratio Years

      1 2 3 4 5
Current Ratio   8.83 8.96 9.08 8.99 8.78
Quick Ratio   7.83 7.96 8.08 7.99 7.78
Assets Turnover Ratio 0.88 1.93 2.18 2.40 2.65
Inventory Turnover Ratio 13.33 24.24 24.24 24.24 24.24
Gross Profit Margin Ratio 0.55 0.55 0.55 0.55 0.55
Net Profit Margin Ratio (0.07) 0.02 0.03 0.04 0.05
Return on Assets Ratio (0.02) 0.01 0.02 0.02 0.03
Return on Equity Ratio (0.21) 0.12 0.18 0.21 0.22
Debt to Equity Ratio 2.46 2.47 2.04 1.39 -
Times Interest Earned Ratio (0.16) 1.82 2.62 4.03 7.46
Current Assets Turnover Ratio 1.51 2.71 2.67 2.70 2.76
Total Assets to Total Liabilities Ratio 0.99 0.99 0.99 0.99 0.99

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 Profitability Analysis
           
  1 2 3 4 5
Net Profit Before interest & depreciation 291,750 641,850 706,035 776,638 854,302
Interest 183,302 197,545 173,509 136,652 86,976
Profit before Depreciation & Tax 108,448 444,305 532,526 639,986 767,326
Less: Depreciation & Amortization 321,490 283,292 252,012 226,326 205,179
Profit before Tax (213,042) 161,013 280,515 413,660 562,147
Less: - Income Tax - 40,253 70,129 103,415 140,537
Net Profit (Transferred to B/S) (213,042) 120,760 210,386 310,245 421,610
 
Financial Ratio
Net profit after tax before Interest (29,740) 318,305 383,895 446,897 508,586
3,552,06 3,483,87 3,476,72
Total Capital employed 5 3,566,909 5 0 3,465,864
1,027,33 1,027,33 1,027,33
Equity capital 8 1,027,338 8 8 1,027,338
1,145,44 1,455,68
Net worth 814,296 935,055 2 7 1,877,297
2,524,72 2,338,43 2,021,03
Total Debt 7 2,539,572 3 4 1,588,567
Return on Capital employed -0.84% 8.92% 11.02% 12.85% 14.67%
Return on Equity -20.74% 11.75% 20.48% 30.20% 41.04%
Return on Networth -26.16% 12.91% 18.37% 21.31% 22.46%
Debt to Total Capital 71.08% 71.20% 67.12% 58.13% 45.83%
Debt/ Net worth ratio 3 10/100 2 72/100 2 4/100 1 39/100 85/100
 
Debt Serving Capacity Ratio
 
Net Profit Before Interest and dep. after
Tax 291,750 601,597 635,906 673,223 713,766
 
Payment of Interest and Principal 247,400 389,839 493,999 585,338 663,858
 
Debt Serving Ratio 1.18 1.54 1.29 1.15 1.08

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Summary of Project Cost
           

S. No. Description Qty Rate Total Cost Total Cost

           
           
1 Equipment        
  Baking Tray     30,000  
  Cake Mould     20,000  
  Bread Tins     400  
  Whisk     350  
  Pallet Knife     300  
  Piping Bag     600  
  Cake Stand     1,500  
  Steel Bowls     1,000  
  Aluminum Tray     8,000  
  Rolling Pin     1,000  
  Sauce Pan     7,000  
  Spatula     200  
  Cookies Cutter     250  
  Knife set     3,000  
  Baking Pan     20,000  
  Tray     10,000 103,600
           
2 Furniture & Fixture        
           
  Working Table     25,000  
  Showcase     70,000  
  Steel table     60,000 155,000
           
3 Machinery        
  Cooking Range     142,500  
  Multiple Mixing Machine     125,000  
  Grinder     10,000  
  Bread Slicer     10,000  
  Air Conditioner     300,000  
  Telephone     5,000  
  Fryer     18,500  
  Refrigerator     42,000  
  Deep Freezer     68,000  
  Dough Mixture     42,000  
  Cooling Rack     78,000  
  Weighing Scale     7,000  
  Inverter     120,000 968,000
            
5 Vehicle        
  Electric Scooter     110,000
           
Decoration and
6 Construction       300,000
           
7 Pre-operating Expenses        
  Promotional Expenses     50,000  
  Rent     360,000  
  Registration expenses     25,000  
  Miscellaneous cost     30,000 465,000
Total 2,101,600
Net Working Capital       493,188
Total Project Cost       2,594,788
 Cakes Inside
   
Working Capital Requirement Analysis
             
Description 1 2 3 4 5
Current Assets:          
           
Inventory 232,875 281,779 309,957 340,952 375,048
             
Accounts Receivable 517,500 626,175 688,793 757,672 833,439
           
Operational Cash 468,875 567,339 624,073 686,480 755,128
           
Total Current Assets 1,219,250 1,475,293 1,622,822 1,785,104 1,963,614
           
Current Liabilities:          
             
Account Payable 232,875 281,779 309,957 340,952 375,048
  Total Current Liabilities 232,875 281,779 309,957 340,952 375,048
Net Working Capital 986,375 1,193,514 1,312,865 1,444,152 1,588,567

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 Loan Repayment Schedule
 
1 2 3 4 5

Loans

Opening Balance - 2,031,540 1,839,246 1,518,756 1,070,070

Working Capital Loan - 493,188 493,188 493,188 493,188

Long Term Loan - 1,538,352 1,346,058 1,025,568 576,882

Loan Receipt 2,095,638 - - - -

Working Capital Loan 493,188 - - - -

Long Term Loan 1,602,450 - - - -

Total 2,095,638 2,031,540 1,839,246 1,518,756 1,070,070

Repayment of loan 64,098 192,294 320,490 448,686 576,882

Working Capital Loan - - - - -

Long Term Loan 64,098 192,294 320,490 448,686 576,882

Closing Balance 2,031,540 1,839,246 1,518,756 1,070,070 493,188

Working Capital Loan 493,188 493,188 493,188 493,188 493,188

Long Term Loan 1,538,352 1,346,058 1,025,568 576,882 -

Total 2,031,540 1,839,246 1,518,756 1,070,070 493,188

Average Balance 1,015,770 1,935,393 1,679,001 1,294,413 781,629

Working Capital Loan 246,594 493,188 493,188 493,188 493,188

Long Term Loan 769,176 1,442,205 1,185,813 801,225 288,441

Interest Rate
Working Capital Loan 10.00% 10.00% 10.00% 10.00% 10.00%
Long Term Loan 10.00% 10.00% 10.00% 10.00% 10.00%

Interest 183,302 197,545 173,509 136,652 86,976

Working Capital Loan 24,659 49,319 49,319 49,319 49,319
Long Term Loan 158,643 148,227 124,190 87,334 37,658

Loan Repayment Schedule

Loan Amount 1,602,450.00 10.00%
Quarterly Principle
Year Quarter Principle Interest Total Payment Outstanding
0 1 - - - 1,602,450.00
0 2 - - - 1,602,450.00
1 3 32,049.00 80,122.50 112,171.50 1,570,401.00
1 4 32,049.00 78,520.05 110,569.05 1,538,352.00
2 1 32,049.00 38,458.80 70,507.80 1,506,303.00
2 2 32,049.00 37,657.58 69,706.58 1,474,254.00
2 3 64,098.00 36,856.35 100,954.35 1,410,156.00
2 4 64,098.00 35,253.90 99,351.90 1,346,058.00
3 1 64,098.00 33,651.45 97,749.45 1,281,960.00
3 2 64,098.00 32,049.00 96,147.00 1,217,862.00
3 3 96,147.00 30,446.55 126,593.55 1,121,715.00
3 4 96,147.00 28,042.88 124,189.88 1,025,568.00
4 1 96,147.00 25,639.20 121,786.20 929,421.00
4 2 96,147.00 23,235.53 119,382.53 833,274.00
4 3 128,196.00 20,831.85 149,027.85 705,078.00
4 4 128,196.00 17,626.95 145,822.95 576,882.00
5 1 128,196.00 14,422.05 142,618.05 448,686.00
5 2 128,196.00 11,217.15 139,413.15 320,490.00
5 3 160,245.00 8,012.25 168,257.25 160,245.00
5 4 160,245.00 4,006.13 164,251.13 -
Total Principal
Paid   1,602,450.00
 Cakes Inside
   
Calculation of Break-even Point
             
  Particulars 1 2 3 4 5
   
A. Fixed Cost
  Depreciation 221,490 183,292 152,012 126,326 105,179
  Amortization 100,000 100,000 100,000 100,000 100,000
  Interest 183,302 197,545 173,509 136,652 86,976
  administrative cost 1,416,000 3,115,200 3,426,720 3,769,392 4,146,331
   
  Total Fixed Cost 1,920,792 3,596,037 3,852,240 4,132,370 4,438,487
   
B. Variable Cost
  Total Direct Cost 1,397,250 3,073,950 3,381,345 3,719,480 4,091,427
   
  Total Variable Cost 1,397,250 3,073,950 3,381,345 3,719,480 4,091,427
   
C. Sales Revenue
  Sales 3,105,000 6,831,000 7,514,100 8,265,510 9,092,061
   
  Total Sales 3,105,000 6,831,000 7,514,100 8,265,510 9,092,061
 
Contribution Margin NRS' 000 1,707,750 3,757,050 4,132,755 4,546,031 5,000,634
 
BEP in NRS ' 000 3,492,349 6,538,249 7,004,073 7,513,401 8,069,976
 
BEP in % of Capacity 112.48% 95.71% 93.21% 90.90% 88.76%

Cakes Inside
Biratnagar, Nepal

PARAMETERS OF THE PROJECT

Sales Revenue Units Rate Revenue
Cakes 5400 500 2,700,000
Pastries 16200 60 972,000
Brownies 9000 60 540,000
Muffin 7200 50 360,000
Cupcakes 9000 40 360,000
Fresh Bread 7200 40 288,000
Cookies 7200 50 360,000
Doughnut 9000 35 315,000
Cream Roll 12600 25 315,000
Total 6,210,000

Staff Expenses Number Salary P. M. Total

 
Chef 1 20000 20,000
Assistant Chef 2 15000 30,000
Delivery boy 1 8000 8,000
Accountant 1 12000 12,000
Marketing Manager 1 20000 20,000
 
Other Benefits 10% 9,000
Total 6   99,000

Increment 10% Per Annum  

 Fixed Assets Rate of
Investment Amount Depreciation Interest Rate  
Machinery &
Equipment 1,071,600 15.00% Long Term Loan 10%
Working Capital
Furniture & Fixture 155,000 25.00% Loan 10%

  Repayment (Years) 4.5

Construction Period
Vehicle 110,000 20.00% (Years) 0.50
Other Assets - 15.00%
Total Fixed Assets 1,336,600  
Decoration and
Construction 300,000  
Pre-operating
Expenses 500,000  
Total 2,136,600  
Working Capital 493,188  

Total Investment 2,629,788  

Direct Costs   45%
  2,794,500

Administrative Expenses   Amount per year

Electricity bill   144,000
Rent   720,000
Water   84,000
Telephone cost   36,000
Stationary cost   60,000
Miscellaneous   600,000
Salary   1,188,000
Total   2,832,000
 
Cost Increase Per annum   10%

Working Capital   Coverage (Days)

Inventory   30
Accounts Receivable   30
 
Accounts Payable   30
Operational Cash   30
 
Number of Days in a Year   360

Project Financing
Equity 25% 534,150
Long Term Loan 75% 1,602,450
Total 100% 2,136,600

Working Capital Financing

Equity 50% 493,188
Working Capital Loan 50% 493,188
Total 100% 986,375

Paid-up Capital   1,027,338

 Cakes Inside
   
Project Payback Period Calculation
               
Depreciation
Net ,
Net Profit Amortizatio Annual Cum Cash Payback
S. No. Year Investment After Tax n & Interest cash flow Benefit Period
(2,594,788 (2,594,788
0 0 (2,594,788) - - ) )
(2,303,038
1 1 (213,042) 504,792 291,750 )
(1,701,441
2 2 120,760 480,837 601,597 )
(1,065,534
3 3 210,386 425,520 635,906 )
4 4 310,245 362,978 673,223 (392,311)
5 5 421,610 292,156 713,766 321,455 4.55
Payback Period of the
Project 4.55

Discount
Rate Net Present Value
5 (103,646)
10 (410,540)
15 (633,299)
20 (795,313)
25 (912,914)
3.62 (0)
Internal
rate of
return 3.62%
 Cakes Inside
   
Estimation of Sales Revenue
   
             
Description 1 2 3 4 5

Revenue

 
Cakes 1,350,000 2970000 3267000 3593700 3953070
 
Pastries 486,000 1069200 1176120 1293732 1423105.2
 
Brownies 270,000 594000 653400 718740 790614
 
Muffin 180,000 396000 435600 479160 527076
 
Cupcakes 180,000 396000 435600 479160 527076
 
Fresh Bread 144,000 316800 348480 383328 421660.8
 
Cookies 180,000 396000 435600 479160 527076
 
Doughnut 157,500 346500 381150 419265 461191.5
 
Cream Roll 157,500 346500 381150 419265 461191.5
 
Total Sales 3,105,000 6,831,000 7,514,100 8,265,510 9,092,061
 Cakes Inside
   
Estimation of employee Cost & Office and Administration Expenses
           
Description 1 2 3 4 5
Employee Costs
Salaries, Allowances and Benefits 594,000 1,306,800 1,437,480 1,581,228 1,739,351
 
 
Office & Administration Costs
Electricity bill 72,000 158,400 174,240 191,664 210,830
Rent 360,000 792,000 871,200 958,320 1,054,152
Water 42,000 92,400 101,640 111,804 122,984
Telephone cost 18,000 39,600 43,560 47,916 52,708
Stationary cost 30,000 66,000 72,600 79,860 87,846
Miscellaneous 300,000 660,000 726,000 798,600 878,460
Total 1,416,000 3,115,200 3,426,720 3,769,392 4,146,331
 Cakes Inside
   
Operating Cost
             
Description 1 2 3 4 5
             
Total Direct Cost 1,397,250 3,073,950 3,381,345 3,719,480 4,091,427
           
Administrative
Costs 1,416,000 3,115,200 3,426,720 3,769,392 4,146,331
             
Total Operating
Cost 2,813,250 6,189,150 6,808,065 7,488,872 8,237,759
 Cakes Inside
Fixed Assets & Depreciation
               
    1 2
Total Depreciatio Closing Opening Depreciatio Closing
Description Assets n Balance Balance n Balance
Machinery &
Equipment 15% 1,071,600 160,740 910,860 910,860 136,629 774,231
Furniture &
Fixture 25% 155,000 38,750 116,250 116,250 29,063 87,188
Vehicle 20% 110,000 22,000 88,000 88,000 17,600 70,400
1,115,11
Total 1,336,600 221,490 1,115,110 0 183,292 931,819
   
   
    3 4
Opening Depreciatio Closing Opening Depreciatio Closing
Description   Balance n Balance Balance n Balance
Machinery &
Equipment 15% 774,231 116,135 658,096 658,096 98,714 559,382
Furniture &
Fixture 25% 87,188 21,797 65,391 65,391 16,348 49,043
Vehicle 20% 70,400 14,080 56,320 56,320 11,264 45,056
Total 931,819 152,012 779,807 779,807 126,326 653,481
   
   
    5    
Opening Depreciatio Closing
Description   Balance n Balance
Machinery &
Equipment 15% 559,382 83,907 475,475
Furniture &
Fixture 25% 49,043 12,261 36,782
Vehicle 20% 45,056 9,011 36,045
Total 653,481 105,179 548,302