I am not looking for just the
I am not looking for just the answer…. I dont know how to set this up…. and this kind of stuff is on the final.
Q1. Janes
Boutique
Jane, a graduate from school of design, is passionate about
multi-cultural fashion trends. She has specialized in fashion designs of the
East, particularly those from India. She
plans on opening a boutique selling Indian outfits. (You can see an example here)
She collects market data described as below.
|
Launch expenses |
Dollars |
|
Website development |
30,000.00 |
|
Showrooming expenses |
75,000.00 |
|
Licensing and other business incorporation fees |
10,000.00 |
|
Initial capital |
50,000.00 |
|
Launch Advertising |
35,000.00 |
|
Total |
200,000.00 |
|
Annual expenses |
Dollars |
|
Store lease -2000 sqft |
100,000.00 |
|
SGA |
20,000.00 |
|
Salary |
360,000.00 |
|
Total |
480,000.00 |
She expects to sell 10,000 units in the first year at an
average price of $100 with a 48% gross margin. In addition, she expects her
business to grow at 10% per annum. She
has approached you to help her create a
worksheet and answer the following questions. (7.5- Points)
Assuming all launch
investments take place in January 2015
1.
What is the net income (or loss) every year from
this business for the next five years?
2.
Applying a discount factor of 12% what is the
NPV (Net Present Value) of the income in these years?
3.
What is the cumulative NPV after every year?
4.
Considering the cumulative NPV when (which year)
will the business breakeven?
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