Projection Analysis

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CBE Fitness Gym celebrated its 9th year of operation last December. The Fitness Gym has earned its reputation as one of the most effective of its kind in the locality. They are currently serving twenty individuals at maximum. The gym features different equipments and instructors at low price. Finally, it has its own shower room for tired individuals.

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
3Aircondotioning Unit20,00060,000
TOTAL1,196,930

QuantityLaborWage per DayWage per Month
5Instructor25037,500
4Office Personnel27533,000
4Maintenance Personnel20024,000
4Laborer15018,000
TOTAL112,500

QuantityGym ItemsPrice per PieceAmount
30Gym T-Shirt3009,000
30Gym Jogging Pants35010,500
50Towels25012,500
TOTAL32,000

Utilities Expense Amount
Electricity60,000
Water40,000
TOTAL100,000

Office Supplies Amount
(Folders, Papers, Receipts, etc.)5,000

Additional RentAmount
50000

Other Expenses Amount
Delivery10,000
Carpentry15,000
Electrical works17,000
TOTAL42,000

SUMMARY
EQUIPMENT1,196,930
LABOR112,500
GYM ITEMS32,000
UTIITIES EXPENSES100,000
OFFICE SUPPLIES5,000
ADDITIONAL RENT50,000
OTHER EXPENSES42,000
Direct Cost1,538,430
10% Profit153,843
10% VAT153,843
Engineering Supervisions44,316
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.

DEPRECIATION CALCULATION

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
Air-conditioning Unit2,000.00
55,556.50

ESTIMATED CASH FLOW OF THE PROJECT (Annually)

YearCash Flow
0-1,890,432.00
1235,750.00
2294,688.00
3492,128.00
4393,703.00
5748,036.00
6187,009.00
7233,761.00
8390,381.00
9312,305.00
10499,688.00...
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