Budget Proposal

Topics: Depreciation, Cash flow, Net present value Pages: 5 (1204 words) Published: September 30, 2012
Papa Geo’s (5 Year Budget Proposal) |

1.0 Executive Summary|
Papa Geo’s is devoted to bringing top notch Italian cuisine at an affordable price that everyone can enjoy, because at Papa Geo’s you’re not just our guest you’re family. We offer a wondrous all-you-can-eat style buffet of the fines Italian cuisine. Unlike your typical sit-down buffets in the Orlando, Florida area; we ensure a unique experience with a combination of both exceptional foods as well as great entertainment that the entire family can enjoy. The following budget plan illustrations how our restaurant will manage our expenses to increase the company’s revenues allowing for a 10 % gain in profit of sales. The budget plan for Papa Geo’s covers the first five years of our company’s growth. The up-front amount for required to be invested is $992,000.00. The loan will be paid in full during the first quarter of the fourth year of business. The net present value for the up-front amount to be invested is $1,069,822 with an internal rate of return at 28% on the investment. | |

2.0 Sales Summary |

2.1 Sales Forecast
Papa Geo’s total sales will start with the industry average in its first year of $414,616.45. We at Papa Geo’s are striving to compete with the top industry companies by targeting an increase of 10% per year in sales over the next five years. By promising and fulfilling our excellent services and quality of food the 10% increase per year maybe an understatement of where our restaurant could be headed in the future. Below is the projection of our sales for the next five years based on a 10% increase in sales each year.

2.2 Methods and Assumptions
The basic assumptions are that we keep our inventories at about 10% of the next month’s sales along with maintaining an average cost of materials and labor at about $4.00 per meal. Papa Geo’s will be open from 10:00am to 9:00pm, 7 days a week with our peak hours being 3:00pm – 6:00pm Monday through Friday. Health benefits will be provided to all managers that qualify; other workers will not be qualified for health benefits until they have reached the management level. The business will be operating at a minimum of 7 employees daily with one person working the cash register, a busser, and two cooks in the kitchen, one person stocking food, an assistant manager, and a manager to handle the work load of our daily business. Another assumption is that our two pizza ovens last at least five years without any major maintenance needed along with any other kitchen equipment. |

3.0 Capital Expenditures|

3.0 Capital Expenditure Budget
The items on the capital expenditure budget are items that are vital the success and growth of the company. Each item on the budget was priced and averaged based on our findings from the data that was collected in results to our research online. We have accumulated an annual depreciation expense of $62,771, while conduct the straight line depreciation method. The use of the straight line depreciation method allow for our company to maintain a fixed set of depreciable business expenses on the company’s tax return. Given our total annual sales of $414,616.45, with the depreciation expenses, rental of the property, and payments of the loan over five years (see section 1.1), the company should have approximately earned $236,260.70 our first year after expenses. Each our earning will increase by 10% according to our forecasting (see section 2.1) and our expenses should stay at the same amount if not they should decrease over time due to the straight line method. Our company will be paying back the loan in full as well as settling financing obligation within four years of the business’s grand opening; this will allow us to lower our debt-equity ratio thus giving our company a more credit worthiness appeal to financial institutions. Attached below is a detailed copy of our projected depreciation expenses (see spreadsheet section 3) over...
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