The past years have been blessed for CBE Fitness Gym. The gym has steady revenue annually. It experienced ups and downs but not experience negative revenue. Because of this, the owner is planning for an expansion.
As a result of the owner’s conception, the operation manager made a proposal for the expansion. Basically, the proposal aims to renovate the whole gym to accommodate additional equipment, thus, increasing the gym’s capacity to serve more people. This meant heavy investment on equipment and fixed asset, additional labor and expansion of space. The proposal was based on the performance of the gym for the past years.
The expansion plans to double the capacity of the gym. It will add up facilities that could accommodate another twenty to twenty five persons. The proposed budget for the expansion is P2, 000,000.00.
Expanding the gym comes with risks and uncertainties. This move does not guarantee additional profit nor ensures minimization of expenses, to make the point clear; it is not guaranteed that the investment will be worth it. Because of this, the decision to pursue the project will be based on different projections. The administration also identified a twelve percent (12%) rate of return for the investment.
ESTIMATED BUDGET ALLOCATION
QuantityEquipmentPrice per PieceAmount
2Precor C966i Treadmill94,000188,000
2Life Fitness 95ce Upright Bike85,634171,268
2Life Fitness 95xi Elliptical Cross Trainer112,988225,976 2Stair Master Stepmill 7000PT Stair Climber93,013186,026
3Steal PRO Style Dumbbell Set47,000141,000
3Maxicam Dumbbell Rack18,80056,400
2Maxicam Adjustable Incline Rack18,80037,600
2Life Fitness Hammer Equipment65,330130,660
QuantityLaborWage per DayWage per Month
QuantityGym ItemsPrice per PieceAmount
30Gym Jogging Pants35010,500
Utilities Expense Amount
Office Supplies Amount
(Folders, Papers, Receipts, etc.)5,000
Other Expenses Amount
Estimated Total Cost1,890,432
The expansion plans to recapture the initial investment before the useful life span of the equipment that will be bought. The equipments have a ten year useful life span and depreciates once a month.
EquipmentDepreciation per Year
Precor C966i Treadmill9,400.00
Life Fitness 95ce Upright Bike8,563.40
Life Fitness 95xi Elliptical Cross Trainer11,298.80
Stair Master Stepmill 7000PT Stair Climber9,301.30
Steal PRO Style Dumbbell Set4,700.00
Maxicam Dumbbell Rack1,880.00
Maxicam Adjustable Incline Rack1,880.00
Life Fitness Hammer Equipment6,533.00
ESTIMATED CASH FLOW OF THE PROJECT (Annually)