Transcript The Cutting Edge Budget Proposal 2011-2016

PAPA GEO’S RESTAURANT
BUDGET PROPOSAL FOR
2012-2016
BUSN-278
Budgeting and Forecasting sessionB
Professor Brandon Foor
DeVry University
TABLE OF CONTENTS
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Objectives
Budget Preparation
Financial Statements
Methods and Assumptions
Competition
Geographic Target
Sales Forecast
Capital Expenditures Budget
Cash Flow
NPV
Rate of Return
Payback Period
Pro Forma Income Statement
Pro Forma Cash Flow
Pro Forma Balance Sheet
OBJECTIVES
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Papa Geo’s Restaurant will be a single-location, sit-down Italian
restaurant located in Orlando, Florida. Our objective is to generate an
income of at lest $40,000 per year, starting sometime in the second year
of the operation, as well as profit that is at least 2% of sales
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Restaurant targets middle to lower-middle class families with children,
as well as adults and seniors,
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Our Italian food will be served in buffet style
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The company will operate from 10:00 am to 9:00 pm all 7 days a week
BUDGET PREPARATION
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Five year planning horizon is used.
The initial up-front investment includes $900,000 investment.
In deciding on the initial investment, the Net Present Value
(NPV) was calculated.
The discount rate for the required rate of return is 10%.
Discount factors for a five year period were taken from present
value tables.
This created the present value of cash inflows. The total was
then taken and divided by the initial $900,000.00 investment.
The Rate of Return (ARR) was calculated simply by using the
cash inflows for the 5 year period and adding in the depreciation
for the equipment.
This amount was then divided by the initial investment.
The Internal Rate of Return (IRR) was figured by taken the
initial investment and dividing it by the annual cash inflows.
FINANCIAL STATEMENTS
A Pro-Forma Financial statement is a financial
statement that a company prepares to consider the
effects of a potential activity.
 Pro forma describes a presentation of data, typically
financial statements, where the data reflect the world
on an 'as if' basis.
 That is, as if the states of the world were different
from that which is in fact the case.
 Including the first year well have positive ending
balances.
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METHODS AND ASSUMPTIONS
Information is based on research on locations
that sell the same products.
 Italian buffet makes $9 billion sales in one year.
 Assumption that amount sold in one year will be
about 144,075.22
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COMPETITION
As of today there are only 2,728 Italian buffets in
the whole United States.
 Our price is lower then that fast food restaurants
around us.
 We are more clean and faster when it comes to
seating down our customers for them to eat.
 Also we have a vending machines to keep
children busy while adults enjoy their meal.

GEOGRAPHIC TARGET
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The target is middle to lower- middle class families
with children, as well as adults and seniors.
The area is within 15 minutes of the store has 10,000
families, mostly form lower to middle class
neighborhoods.
 Average family size is 4 people per household.
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The lower to middle class population is growing at
about 6% per year over the next five years in this
area.
SALES FORECAST
Papa Geo’s Restaurant - 1st Year Forecast
Monthly Sales
Growth
Sales
Other
Monthly Totals
YTD Totals
Jan.-March
0%
$9,000.00
$3,006.00
$12,006.00
$12,006.00
April-June
366%
$42,000.00
$2,030.07
$44,030.07
$56,036.07
July-Sep.
Oct.-Dec.
100%
$42,700.00
$1,500.00
$44,200.00
$100,236.07
98%
$41,993.00
$1,946.15
$43,939.15
$144,175.22
Total sales forecasted for 5 years
Year 1
Year 2
Year 3
Year 4
Year 5
0
3%
4%
5%
6%
$144,075.22
$148,397.47
$154,333.37
$162,050.04
$171,773.04
Capital Expenditures Budget
Equipment
Miscellaneous
Furniture/Fixtures
Facility Costs
$68,083.53
$4,810.00
$397.00
$45,000.00
$50,207.00
CAPITAL EXPENDITURES BUDGET
Total Capital Expenditure is $50,207
 As stated we need to spend $68,083.53 on
equipment that is needed to start the business.
 We also are going to spend $4,810 on
miscellaneous items such as dish sets, cups,
silver ware, etc.
 And as for the furniture/ fixtures the amount is
$397 these are important because we need an
office desk to be able to work on paper work such
as applications, bills, payroll, etc.
 The amount spent on the Capital Expenditure
should cover the full five years
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Cash Flow Budget Worksheet
Pap Geo’s Restaurant
2012
Beginning Cash Balance:
Cash Inflows (Income):
Loan Proceeds
Sales & Receipts
Total Cash Inflows:
Available Cash Balance:
Cash Outflows (Expenses):
0
2013
$815,005
2014
$827,682
2015
$837,698
2016
$711,768
900,000
Total
$3,192,153
900,000
144,075
$1,044,075
$1,044,075
148,397
$148,397
$963,403
154,333
$154,333
$982,015
162,050
$17,988
$855,686
171,773
$19,067
$730,835
780,629
$1,680,629
Advertising
Health Insurance
Insurance
20,000
5,000
1,000
10,000
5,000
1,000
10,000
5,000
1,000
10,000
5,000
1,000
10,000
5,000
1,000
60,000
25,000
5,000
Interest
11.590
10.662
9.676
8.630
7.518
48.077
Payroll
Rent or Lease
Utilities & Telephone
Renovations
Inventories
Equipment
Furniture
Credit card fees
80,000
10,000
1,000
15,000
1,599
68,084
397
400
80,000
10,000
1,000
80,000
10,0000
1,000
80,000
10,000
1,000
80,000
10,000
1,000
1,647
1,713
1,799
1,907
412
428
450
477
400,000
50,000
5,000
15,000
8,665
68,084
397
2,166
$214,070
$119,721
$118,818
$117,878
$116,902
$687,388
15,000
16,000
$15,000
$299,707
$815,005
$16,000
$135,721
$827,682
17,500
8,000
$25,500
$144,318
$837,698
18,040
8,000
$26,040
$143,918
$711,768
19,090
8,000
$27,090
$143,992
$586,843
85,630
24,000
$109,630
$797,018
$3,778,995
Subtotal
Other Cash Out Flows:
Loan Principal
Owner's Draw
Subtotal:
Total Cash Outflows:
Ending Cash Balance:
NPV Analysis ... 10%
Year
Cash Inflows
Discount Factor
1
815,005.00
827,682.00
837,698.00
711,768.00
586,843.00
0.9091
740,921.05
0.8264
683,996.40
0.7513
629,362.51
0.603
429,196.10
0.6209
364,370.82
2
3
4
5
3,778,996.00
Present Value of Cash
inflows
2,847,846.88
Present Value
2,847,846.88
Initial Investment
900,000.00
Net Present Value
1,947,846.88
RATE OF RETURN
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The Rate of Return is used to determine the rate
allowed for the next five years to get the present value
at a positive value.
Rate of Return
Total for equipment
Depreciation
Cash inflows
Initial Investment
ARR
68,083.53
13,616.71
3,778,996.00
900,000.00
4.18
Initial Investment
Annual Cash Inflows
IRR
900,000.00
3,778,996.00
0.2382
Payback Period over 5 Years
Yr 1
Yr 2
Yr 3
Yr 4
Yr 5
Capital Investment
900,000.00 900,000.00 900,000.00 900,000.00 900,000.00
Annual Cash Inflow
815,005.00 827,682.00 837,698.00 711,768.00 586,843.00
Payback Period
1.104
Total Payback
6.064
1.087
1.074
1.264
1.534
Pro-Forma Income Statement
Papa Geo’s Restaurant
REVENUE
Gross sales
Net Sales
Gross Profit (Loss)
OPERATING EXPENSES
For 2012 through 2016
(all numbers in $000)
2012
2013
$144,075
$148,397
$144,075
$148,397
2014
$154,333
$154,333
2015
$162,050
$162,050
2016
$171,773
$171,773
$143,075
$139,617
$148,132
$154,015
$171,773
$20,000
$20,000
$20,000
$20,000
$20,,000
Advertising
20,000
10,000
10,000
10.000
10,000
Depreciation
13,287
10,629
8,504
6,803
5,443
$53,287
$40,629
$38,504
$36,803
$35,443
Salaries and wages
Employee benefits
Insurance
Rent
Utilities
Interest
Furniture & equipment
$60,000
5,000
1,000
10,000
1,000
11,590
397
$60,000
5,000
1,000
10,000
1,000
10,662
0
$60,000
5,000
1,000
10,000
1,000
9,676
0
$60,000
5,000
1,000
10,000
1,000
8,630
0
$60,000
5,000
1,000
10,000
1,000
7,518
0
Total
Total Operating Expenses
$88,987
$87,662
$86,676
$85,630
$84,518
$142,274
$801
160
$641
$128,291
$11.327
2,265
$9,061
$125,180
$22,952
4,590
$18,362
$122,433
$31,582
6,316
$25,266
$119,961
$43,307
8,661
$34,646
Selling
Salaries and wages
Other
Total Selling Expenses
General/Administrative
Net Income Before Taxes
Taxes
NET INCOME (LOSS)
PRO-FORMA INCOME STATEMENT
A Pro-Forma Financial statement is a
financial statement that a company
prepares to consider the effects of a
potential activity.
Pro forma describes a presentation of
data, typically financial statements, where
the data reflect the world on an 'as if' basis.
That is, as if the states of the world were
different from that which is in fact the case.
Pro-Forma Cash Flow Statement
Pap Geo’s Restaurant
2012
Beginning Cash Balance:
Cash Inflows (Income):
Loan Proceeds
Sales & Receipts
Total Cash Inflows:
Available Cash Balance:
Cash Outflows (Expenses):
Advertising
Health Insurance
Insurance
0
2013
$815,005
2014
$827,682
2015
$837,698
2016
$711,768
900,000
Total
$3,192,153
900,000
144,075
$1,044,075
$1,044,075
148,397
$148,397
$963,403
154,333
$154,333
$982,015
162,050
$17,988
$855,686
171,773
$19,067
$730,835
780,629
$1,680,629
20,000
10,000
10,000
10,000
10,000
60,000
5,000
1,000
5,000
5,000
5,000
5,000
1,000
1,000
1,000
1,000
25,000
5,000
Interest
11.590
10.662
9.676
8.630
7.518
48.077
Payroll
Rent or Lease
Utilities & Telephone
Renovations
Inventories
Equipment
Furniture
Credit card fees
80,000
10,000
1,000
15,000
1,599
68,084
397
400
80,000
10,000
1,000
80,000
10,0000
1,000
80,000
10,000
1,000
80,000
10,000
1,000
1,647
1,713
1,799
1,907
412
428
450
477
400,000
50,000
5,000
15,000
8,665
68,084
397
2,166
$214,070
$119,721
$118,818
$117,878
$116,902
$687,388
15,000
16,000
$15,000
$299,707
$815,005
$16,000
$135,721
$827,682
17,500
8,000
$25,500
$144,318
$837,698
18,040
8,000
$26,040
$143,918
$711,768
19,090
8,000
$27,090
$143,992
$586,843
85,630
24,000
$109,630
$797,018
$3,778,995
Subtotal
Other Cash Out Flows:
Loan Principal
Owner's Draw
Subtotal:
Total Cash Outflows:
Ending Cash Balance:
PRO-FORMA CASH FLOW STATEMENT
“ The cash budget [beginning cash balance +
anticipated receipts - expected disbursements =
ending cash balance] will provide information
about any need for working capital, such as a line
of credit, short term financing, or an infusion of
capital from the owners of the business.
 The cash budget necessarily takes into account
any payments on existing indebtedness, receipts
of interest on customer financing arrangements,
and any anticipated capital expenditures.”
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Pro Forma Balance Sheet
Years 1-5
Assets
2012
2013
2014
2015
2016
$963,403
$963,403
$982,015
$982,015
$855,686
$855,686
$730,835
$730,835
($15,713)
$64,067
$1,011,757
($15,713)
$64,067
$1,030,369
($15,713)
$64,067
$904,04
($15,713)
$64,067
$779,289
Current Assets:
Cash
Total Current Assets
Fixed Assets:
Furniture
Equipment
Less: Acc. Dep.
Total Fixed Assets
Total Assets
$1,044,075
$1,044,075
$397
$68,083.53
($15,713)
$64,067
$1,160,909.53
Liabilities and Capital
Current Liabilities:
Accounts Payable
Accrued Payroll Payable
Insurance Payable
Interest Payable
Total Current Liabilities
Long Term Liabilities
Notes Payable
Total Long-Term Liabilities
Capital
Owner's Equity
Total Capital
Total Liabilities and Capital
Net Worth
$2,666
$80,0000
$1,000
$11,590
$95,256
$2,666
$80,000
$1,000
$10,662
$94,328
$2,666
$80,000
$1,000
$9,676
$93,342
$2,666
$80,000
$1,000
$8,630
$92,296
$2,666
$80,000
$1,000
$7,518
$91,184
$233,631
$233,631
$215,771
$215,771
$196,283
$196,283
$175,021
$175,021
$151,821
$151,821
$125,000
$125,000
$453,887
$67,373
$0
$310,099
$165,650
$0
$289,625
$233,642
$0
$267,317
$319,533
$0
$243,005
$426,872
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