5.1 TOTAL PROJECT COST
The L&M partnership needs a total cost of Php 12,000,000 to be able to operate its intended business covering the costs required for its initial operation. The amounts involve the costs of the purchases of office equipment, furniture & fixtures, raw materials, and office supplies; the costs of organizational and legal fees, and the acquisition of various permits and licenses from different government agencies. In addition, the loanable fund also form part in the amount specified.
The initial costs of the proposed project are broken down as follows:
Petty cash fund Php 15,000
Office equipment 1,169,000
Office furniture & fixtures 210,000
Store fixtures and equipment 96,000
Raw materials 555,000
Operating ash 8,839,500
Organizational cost 40,500
5.2 INITIAL CAPITAL INVESTMENT
The initial capital investment will be provided by the following partners:
|Incorporators |Subscribed Shares |Subscribed Amount |Paid-in Capital | |Labendia, Decerell |24,000 |Php 2,400,000 |Php 2,400,000 | |Lacsa, Ashleen |24,000 |Php 2,400,000 |Php 2,400,000 | |Laroza, Erika |24,000 |Php 2,400,000 |Php 2,400,000 | |Legamia, JohnLouie |24,000 |Php 2,400,000 |Php 2,400,000 | |Maranan, Oly |24,000 |Php 2,400,000 |Php 2,400,000 | |TOTAL |120,000 |Php 12,000,000 |Php 12,000,000 |
5.3 FINANCIAL ASSUMPTIONS
The financial assumptions of the L&M Partnership comprise the following:
• The income tax rate on the partnership is 30%.
• Depreciable assets would be depreciated using the straight-line method and would have a useful life of 10-15 years.
• Intangible assets are amortized every 5 years.
• Repair and maintenance expense would be incurred yearly without subsequent increases.
• Rent expense will increase every 5 years by 10%.
• Utilities expense will increase by 2% semi-annually.
• Advertising and promotional expense will increase by 5% annually.
• Office supplies expense will increase annually by 2%; 80% of these supplies would be used.
• Store supplies will increase annually by 2%; 80% of these supplies would be used.
• Salaries of the internal auditor, general manager, and supervisor will increase 2% annually.
• Salaries of the cashier, bookkeeper, and secretary will increase 4% annually.
• Salaries of the client representatives, the credit investigators, the consultants, the collectors will increase by 10% annually.
• Fixed selling price is 50% marked-up.
• Variable selling price increases annually by 5%.
• Sales increases by 4.68% annually.
• Raw materials increases by 10% annually, 80% of which are completely manufactured.
• Franchise will be allowed at the third year of operation for P 250, 000.
• Franchise increases by 1 from the third year.
• 20% of sales is on account.
5.4 PROJECTED BALANCE SHEET
Cash P 4,562,530 P 4,775,260 P 5,...