Make vs buy

Papa Geo Budget Proposal For 2018] BUSN-278 Prof. Marie Main DeVry Table of Contents Section Subsection Page Number 0Executive summary
2. 0
Sales Forecast
2. 1
Sales Forecast
2. 2
Methods and Assumptions
3. 0
Capital Expenditure Budget
4. 0
Investment Analysis
4. 1
Cash flows
4. 2
NPV Analysis
4. 3
Rate of Return Calculations
4. 4
Payback Period Calculations
5. 0
Pro Forma Financial Statements
5. 1
Pro Forma Income Statement
5. 2
Pro-Forma Cash flow Statement
5. 3
Pro-Forma Balance Sheets
6. 0
Works Cited
7. 0
Appendices
7. 1
Appendix 1: [description]
7. 2
Appendix 2:
[description] etc
Products and services
Papa Geo has a vision of creating a restaurant in one location, and generate $40, 000 annually. Moreover, the income is expected from the second year of operation but the company expects a 2% profit. The business is planned to be located in Florida, where there are a large number of lower middle class, which is the main target group. The business serves 10, 000 families mostly with an average of four people, which translates to 40, 000 people. The population grows at about 6%, which means in the next five years Papa Geo will be serving 52, 000 people. Moreover, this means that the sales of the company may also increase by 6% annually considering the population growth. The restaurant is intended to sell diverse products, which include buffet, pizza, soup, sauces and desserts. In addition, the restaurant will have a self-service soda bar.
Competition
Although there are other companies such as McDonalds serving the area, the prices of their products are not affordable to most people in Florida. Moreover, these companies do not have physical locations in the area but rely on suppliers. This means that Papa Geo has the potential of competing effectively in the market and possibly gaining competitive advantage (Jeffries & McGrath, 2008). The fact that the products of the company are rare in the market consequently highly demand makes the company more competitive. This will ensure that the company records high sales volume. Moreover, the company will register high sales volume because they produce variety, which gives consumers the ability and freedom of choice. Finally, the company strategy is effective because it attracts children too, which will boost sales since it will be assumed to a family restaurant (Jeffries & McGrath, 2008).
Financial Budgetary and the contributory aspect towards achieving the company’s strategy
The offers given by financial lending institution will be enough in setting up the business and repayment period is reasonable, which will grant the owner the opportunity to repay comfortably. Therefore, the business can be set up but it requires effective analysis and forecasting due to uncertainties in the business environment. Proper financial budgetary planning is fundamental in achieving the company’s strategy.
Sale forecast forms the most critical part of this budget proposal because, it is through proper and accurate forecasts in sales that the entrepreneur would be able to determine the amount to repay either in monthly or annual basis.
2. 1 Sales Forecast
Year
Year 1
Year 2
Year 3
Year 4
Year 5
Sales
$102200000
$108332000
$114831920
$121721835. 2
$129025145. 31
The above sales forecasts are made with the assumptions that one unit in the company goes at $7, and each individual in the 15-minute area purchases one unit per day. Secondly, it is assumed that since the population increases at 6% annually for the next five years, sales volume also increases at the same margin.
2. 2 Methods and Assumptions
This budgetary proposal assumes that, the owner is granted a loan for the preliminary startup, which is repayable within 10 or more years. The repayment is done at the current rates, which range from 9. 5% to 12%. More over, the owner is to use personal investments in operating the business until it starts generating adequate cash flow. This sales forecast is based on the assumption that the inventories are expected to be estimated at 10% for the subsequent month’s sales. This study reveals that the standard meal costs at least $4 in terms of labor and material. Similarly, a representative family spends $4 on selling machine tokens. It is notable that the managers enjoy some privileges, which are not extended to other workers. This cuts the cost of operation consequently favorable for the sale forecast made.
Item
quantity
Cost ($)
total
Cost of registration
1
160
160
Renovation
1
15, 000
15, 000
Soda fountain bar
1
70, 000
140, 000
Pizza ovens
2
20, 000
40, 000
Video game vending machines
6
8000
48, 000
Management office, desk & laptop computer
1
90, 000
90, 000
Staff lunchroom
1
8, 000
8, 000
Four-seater tables and chairs
20
200
4, 000
Busing cart
1
700
700
Commercial dishwasher
1
1000
1000
Total
34, 6860
The above projection of capital expenditure is based on the assumed demand of the intended restaurant’s products. It is imperative to note that, the projected total investment of $1000, 000 if fundamental in ensuring the business start in a good note. The major items as listed above are significant in achieving the company’s strategy because they act as facilitators or catalysts.
4. 1 Cash flows
4. 2 NPV Analysis
This statement indicates the amount of sales and the capital expenditure. It is intended to calculate the income, profit and loss margins.
Pro Forma Statement of Cash Flows
All figures in USD
Year 1
Year 2
Year 3
Year 4
Year 5
Cash Flow from Operating Activities:

Cash receipts from customers
102, 200, 000. 00
108, 332, 000. 00
114, 831, 920. 00
121, 721, 835. 20
129, 025, 145. 30
Cash paid to suppliers and employees
160, 000. 00
160, 000. 00
160, 000. 00
160, 000. 00
160, 000. 00
Cash generated from operations

Interest Paid (if any)

Tax Paid (if any)
4, 000. 00
4, 000. 00
4, 000. 00
4, 000. 00
4, 000. 00
Net cash flow from operating activities
102, 364, 000. 00
108, 496, 000. 00
114, 995, 920. 00
121, 885, 835. 20
129, 189, 145. 30

Cash Flow from Investing Activities:

Additions to Equipment
-331, 860. 00

Renovation of Building
-15, 000. 00

Net Cash Flow from investing activities

Cash Flow from Financing Activites:

Payment of Loan
-120, 000. 00
-120, 000. 00
-120, 000. 00
-120, 000. 00
-120, 000. 00
Net cash flow from financing activities

Cash Flow per year
101, 897, 140. 00
108, 376, 000. 00
114, 875, 920. 00
121, 765, 835. 20
129, 069, 145. 30

Prime, J. H. (1967). Investment analysis. Englewood Cliffs, N. J: Prentice-Hall.
7. 1 Appendix 1: [Budget proposal]
7. 2 Appendix 1: [worksheet]
7. 3 Appendix 1: [power point]