Develop a feasible financial plan for a new startup company
One of the essential skills you need to acquire in this course is (S1) develop a feasible financial plan for a new start company. Except one or two ideas, you are already familiar with all the other concepts that you need to develop a financial plan for new start up business. This assignment is designed to check your ability to in this regard.
A) As a young entrepreneur, you are about to launch a new (startup) business that manufactures a single good using some equipment (fixed assets), raw materials and few workers. The business has some other expenses such as renting a premises, electricity, water, etc. (you can have a total monthly amount of these other expenses and assume it remains constant throughout the 12 months)
B) Make forecasts for levels of monthly sales [units sold x price of output (assuming price remains the same throughout the year], direct cost of output and other expenses.
C) Plan how you intend to get the financial resources [assume some of your own money, some loan from bank and also some equity capital. Bank interest rate is 8%, you want to earn at least 10 % profit from this business while other equity capital providers require a 15 % rate of return]
D) Prepare proforma (predicted) (1) cash flow statement (for 12 months), end of the year proforma income statement and balance sheet statement. Assume 10 % depreciation and tax rate of 15 %.
E) Based on your calculations, give a rough forecast when you will be able to breakeven.
F) Calculate your weighted average cost of capital and see if your current rate of return covers your cost of capital.