Week 6 Project Activity: Pro Forma Cash Budget (Draft)Use the Budget Proposal Workbook.xlsx and Budget Proposal Template.docx to develop pro forma cash budgets for the new business. You will be graded
Papa Geo’s Restaurant
Budget Proposal
for
[2020-2024]
Table of Contents
| Section | Title | Subsection | Title | Page Number |
| 1.0 | Executive Summary | | | 4 |
| 2.0 | Sales Forecast | | | 4 |
| | | 2.1 | Sales Forecast | |
| | | 2.2 | Methods and Assumptions | |
| 3.0 | Capital Expenditure Budget | | | 4 |
| 4.0 | Investment Analysis | | | 5 |
| | | 4.1 | Cash Flows | 5 |
| | | 4.2 | NPV Analysis | 5 |
| | | 4.3 | Rate of Return Calculations | 6 |
| | | 4.4 | Payback Period Calculations | 6 |
| 5.0 | Pro Forma Financial Statements | | | 7 |
| | | 5.1 | Pro Forma Income Statement | 7 |
| | | 5.2 | Pro Forma Balance Sheet | 7 |
| | | 5.3 | Pro Forma Cash Budget | 8 |
| 6.0 | Works Cited | | | 8 |
| 7.0 | Appendices | | | 8 |
| | | 7.1 | Appendix 1: [description] | |
| | | 7.2 | Appendix 2: [description] | |
Papa Geo’s Restaurant needs to be competitive and unveil marketing crusades to protect their returns in the business. However, it is guided by typical objectives in the marketing plan. The first objective of the restaurant is ensuring customer satisfaction and loyalty. The target market entails about 10,000 families which is a totality of lower to middle class clients with zero direct competition. However, the customers’ satisfaction is determined the customer’s loyalty to the restaurant especially due to the services that they receive. The restaurant wins the customers through the good Italian food of low price. Stunning cleanliness of the restaurant is welcoming and eye catching which applies to both the foods served and the environment. Generation of the restraint traffic will impact the Restaurant towards success. The restaurant will cultivate a customer base such as having demanding lunchtimes and dinner services through intensive marketing. It will achieve this through weekly and monthly promotions as the marketing strategies.
The restaurant needs to attain their financial goals. The objective is to meet the financial income goal of $40000 annually. At the starting of the second year the company expects to attain a minimum of 2% profits of the sales. The main objective of the restaurant is profitability. It is attainable with the managerial ability to achieve the weekly goals especially through cost reduction with profitability growth concurrently.The restaurant needs to develop a restaurant brand. As the restaurant grows successfully, it will improve it’s place in the local market and toughen the brand. The quality of the food served has a great influence on the restaurant branding. The company purposes to cook using healthy products and use the brand to win new customers (Myers, 2019).
The sales forecast table illustrates the restaurants ability to offer services to the clients through listing the total services sold and the net sales in every year.
2.1 Sales Forecast
| | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Sales | $1,074,150 | $2,157,700 | $2,390,100 | $2,625,920 | $2,880,040 |
The sales are expected to rise each year as the restaurant continues to gain a higher customer base each year through marketing.
2.2 Methods and AssumptionsThe sales forecast figures were obtained from the customer surveys which are based on the Italian fast food industry. Using the historical analysis of other restaurants with similar services and the customer base similar to that of this restaurant, we were able to structure the sales for each year in the next five years.
| year 1 | year 2 | year 3 | year 4 | year 5 | | | | |
| $204,360 | $393,000 | $411,800 | $440,500 | $460,700 | (payroll) | | | |
| $50,000 | $53,000 | $53,000 | $52,000 | $50,000 | (marketing) | | ||
| $25,000 | $30,000 | $34,000 | $37,000 | $41,000 | (utilities) | | | |
| $12,000 | $38,000 | $43,000 | $44,000 | $45,000 | (repairs/maintainance) | |||
| $2,400 | $10,000 | $11,000 | $13,000 | $15,200 | (dishes/ cleaning supplies) | |||
| $15,000 | $18,000 | $22,000 | $24,000 | $31,000 | (employee healthcare) | |||
| $17,000 | $50,000 | $50,000 | $50,000 | $5,000 | (rent) | | | |
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| $325,760 | $606,000 | $624,800 | $660,500 | $647,900 | | | | |
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This data was gathered from numerous consumer surveys of the fast food industry. Using the data, we were able to develop the most crucial costs for every restaurant and then estimate the increment of capital expenditure as the restaurant’s sales grow.
4.0 Investment Analysis
The discount rate used in the calculations is 5 % since it is the most dominant rate that most restaurants similar to this one use (Van den Berghe.et.al, 2019). The net present value of the firm is calculated as $2,695,521
which illustrates that the company’s investment is very productive. In addition, the rate of return in all years indicates that the company’s profitability is approximately twice the amount of investment that was made.
4.1 Cash flows
| year 1 | year 2 | year 3 | year 4 | year 5 | |
| $1,074,150 | $2,157,700 | $2,390,100 | $2,625,920 | $2,880,040 | (cash sales) |
| $69,045 | $134,673 | $148,117 | $162,899 | $179,146 | (taxes) |
| $10,300 | $12,000 | $13,000 | $14,000 | $15,000 | (sales of current assets) |
| ($204,360) | ($393,200) | ($411,860) | ($431,453) | ($451,717) | (cash spending) |
| ($570,420) | ($1,380,599) | ($1,493,514) | ($1,619,145) | ($1,758,632) | (bill payment) |
| $378,715 | $530,574 | $645,843 | $752,221 | $863,837 | (net cash flow) |
| $495,311 | $1,112,740 | $1,537,093 | $2,508,380 | $2,647,942 | (cash balance) |
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4.2 NPV Analysis
| npv |
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| year 1 | year 2 | year 3 | year 4 | year 5 |
| $378,715 | $530,574 | $645,843 | $752,221 | $863,837 |
| $360,680.00 | $481,246 | $557,903 | $618,854 | $676,838 |
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| Npv | $2,695,521 |
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4.3 Rate of Return
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| current value of investment | original value of investment | rate of return |
| year 1 | 1,000,000 | 250,000 | 400 |
| year 2 | 2,000,000 | 1,000,000 | 200 |
| year 3 | 2,200,000 | 1,500,000 | 147 |
| year 4 | 2,500,000 | 1,700,000 | 147 |
| year 5 | 2,900,000 | 1,900,000 | 152 |
4.4 Payback Period
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| cash inflow | cumulative cash flows | initial oulay | remaining payment |
| year1 | $378,715 | $378,715 | -1,000,000 | -621,285 |
| year 2 | $530,574 | $909,289 |
| 288,004 |
| year 3 | $645,843 | $1,555,132 |
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| year 4 | $752,221 | $2,307,353 |
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| year 5 | $863,837 | $3,171,190 |
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| $3,171,190 |
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| payback period is two years |
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| pro formula income statement |
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| year 1 | year 2 | year 3 | year 4 | year 5 |
| net sales | $1,074,150 | $2,157,700 | $2,390,100 | $2,625,920 | $2,880,040 |
| direct costs of sales | $375,103 | $700,340 | $770,238 | $847,101 | $931,564 |
| operating expenses | $325,760 | $606,000 | $624,800 | $660,500 | $647,900 |
| taxes incurred | $114,899 | $200,001 | $238,831 | $281,506 | $328,753 |
| net profits | $258,388 | $651,359 | 756,231 | $836,813 | $971,823 |
5.2 Pro Forma Balance Sheets
| pro forma balance sheet | | | | | |||||
| cash | $495,311 | $1,112,740 | $1,537,093 | $2,508,380 | $2,647,942 | ||||
| inventory | $14,331 | $26,756 | $29,427 | $32,364 | $35,591 | ||||
| Other Current Assets | ($10,300) | ($22,300) | ($35,300) | ($49,300) | ($64,300) | ||||
| net current assets | $499,342 | $1,117,196 | $1,531,220 | $2,491,444 | $2,619,233 | ||||
| longterm assets | $0 | $0 | $0 | $0 | $0 | ||||
| liabilities | | | | | | ||||
| current borrowing | 0 | $0 | $0 | $0 | $0 | ||||
| accounts payable | $98,320 | $114,831 | $123,464 | $133,942 | $145,495 | ||||
| other current liabilities | $69,045 | $203,718 | $351,835 | $514,734 | $693,880 | ||||
| net current liabilities | $167,364 | $318,549 | $475,299 | $648,675 | $839,374 | ||||
| earnings | $258,388 | $651,359 | 756,231 | $836,813 | $971,823 | ||||
| pro forma cash flows |
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| cash sales | $1,074,150 | $2,157,700 | $2,390,100 | $2,625,920 | $2,880,040 |
| sales of current assets | $10,300 | $12,000 | $13,000 | $14,000 | $15,000 |
| cash spending | ($204,360) | ($393,200) | ($411,860) | ($431,453) | ($451,717) |
| additional cash spent | ($570,420) | ($1,380,599) | ($1,493,514) | ($1,619,145) | ($1,758,632) |
| net cash flow | $309,670 | $395,901 | $497,726 | $589,322 | $684,691 |
| cash balance | $495,311 | $1,112,740 | $1,537,093 | $2,508,380 | $2,647,942 |
List any sources you cited in the body of your report.
Fernando, H. S. K. S. B. (2019). Business Proposal on Rail Carriage Manufacturing&Repairing Plant in Sri Lanka (Master's thesis, 华南理工大学).
Myers, M. D. (2019). Qualitative research in business and management. Sage Publications Limited.
Van den Berghe, H., De Meyere, M., Denys, K., & Calcoen, J. (2019). Proposal business plan WRC network-December 2019. Proposal business plan WRC network-December 2019.
NOTE: Start this section at the top of a new page.
This section of the budget proposal is where you’ll attach all of the supporting materials that you’ve referenced in the preparation of your plan and that is too detailed or extensive to be included in the body of the report. Use this page to separate the appendices from the text in the body of your report. Make certain that you update the table of contents to include the title of each exhibit in the appendix and its page number.
7.1 Appendix 1: [put a description here] 7.2 Appendix 1: [put a description here] 7.3 Appendix 1: [put a description here]
