Coolnet wn

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Coolnet wn

  1. 1. Sukkur institute of business administration Feasibility report On Wireless Network at Sukkur Course: Project Finance Class: bba-vi Assigned by: Mr. Abdul khalique daudpota Members: Beena zaidi, Muhammad shaique khan, sheeraz Ali sheikh
  2. 2. May 5, 2011 Table of contentA) PROJECT OBJECTIVESB) EVALUATION CRITERIAC) OPPORTUNITY RATIONALD) MARKETING PLANE) HUMAN RESOURCE REQUIREMENTF) START-UP COSTG) FINANCING STRATEGY AND COST OF CAPITALH) ESTIMATED FINANCIAL STATEMENT
  3. 3. A. PROJECT OBJECTIVESCoolNet’s objectives for the first year of operation include: • The introduction of an innovative product that offers an affordable and convenient way for Internet users to access the Internet away from home. • The creation of a unique environment that allows traveling business people access to their own files and programs. • The placement of 100 public Internet terminals operating throughout the SukkurB. EVALUATION CRITERIA  Quantitative 1. Return( NPV, PI, DPBP) 2. Cost 3. Equity 4. Market demand and its stability 5. Risk  Qualitative 1. Government and community support 2. Potential competition and even threat of it 3. Personal interest and group spirit
  4. 4. C. OPPORTUNITY RATIONAL We have taken this idea, because popularity of the Internet continues to grow at an exponential rate, easy and affordable access is quickly becoming a necessity of life. We will provide to internet users and business persons alike the ability to access the Internet, via our wireless connection away from homes and the offices at an affordable cost. Internet users, young and old, will be able to access the internet while they stay at hospitals, wait at airport, and wait at railway station and sitting in parks. We analyzed that there is a massive demand for internet. Businesses are moving from traditional to virtual markets and the trend of using social web sites is increasing day by day so there is a huge demand from customers for this service. Technology is growing very rapidly so every business person wants to be in touch with its business every time from everywhere and youth wants to chat with each other and family members who are living away from their relatives so they want to be in touch with them, so we have recognized the huge gap in the market and we want to avail that opportunity. We look to be the leader in introducing an innovative and quality public Internet to our current market. We will add value to our community by maintaining a quality product and providing a valuable service. We will utilize the most advanced technology. RISKS: The risks involved with starting COOLNet are: • Will there be a demand for the services offered by COOLNet in City? • Will the popularity of the Internet continue to grow, or is the Internet a fad? • Will individuals be willing to pay for the service COOLNet offers? • Will the cost of accessing the Internet from home drop so significantly that there will not be a market for public Internet terminals?
  5. 5. D. MARKETING PLAN A. Targeting;CoolNet’s connectivity points will be a magnet for local and traveling professionals who desire to workor check their email messages in and away from the office. These professionals will use CoolNet’sconnectivity points in their computers or laptops. CoolNet’s target market covers a wide range of ages:15 years younger to 60 years old men. B. Product: COOLNet provider will provide customers full access to email, WWW and otherapplications. We will provide clients and customers with a unique and innovative product andservice. We will provide this service to our customers with the help of PTCL. We will providethis service in the crowded areas of the sukkur city such as, in hospitals, at railway station, atairports and in parks etc. We will purchase our domain (www.coolnet.com). Whenevercustomers will enter in such areas with their internet devices, they will find there access tointernet and if they want to be registered, they can open our homepage without registration andcan register them there and avail our services. The fees of service will be charged according totime usage; as much as they will avail our service they will be paid according to that time. Thepayment system will be either through credit card or through our account in Muslim CommercialBank (MCB) as they feel easy. First we want to cover such specific areas of sukkur city aftersuccess in it then we will expand our business and cover the whole city.. C. Price. We will charge different prices from non-executive and executive customers according to differentpackages such as student packages and business packages. Customer Detail Price Membership fees For all Rs. 500/= Student Unlimited download Rs. 1000/month +quick access Business men Unlimited download Rs. 2000/month +quick access D. Place
  6. 6. We will try to cover as much area of sukkur as we can. Our area decision depends on thenumber of users of the internet available in a particular area and the quality of service where wecan provide the qualitative access to our customers because of technological limitations; we canincrease our area up to certain limit. E. PromotionWe will implement a pull strategy in order to build consumer awareness and demand. Initially, we havebudgeted Rs: 100,000 for promotional efforts which will include advertising and marketing of ourproduct. We realize that in the future, when competition enters the market, additional revenues mustbe allocated for promotion in order to maintain market share. Promotion strategy will be according to our business as our business. We use multichannel forpromotions (social marketing campaign such as on facebook, pamphlets, T.V ads and other print media).
  7. 7. E. HUMAN RESOURCE REQUIREMENTHuman resource requirements for Coolnet listed below:No Designation Numbers of employees Salary01 Business Manager 1 2500002 Accountant 1 1200003 Computer Operator 1 1000004 Line man 2 1600005 Helper 1 600006 Peon 1 6000 Total 7 75,000
  8. 8. F. START-UP COST: Units/ Per unit Cost of Project months Price Total Office Prepaid office on rent 12 25,000 300,000 A) Total rent expense 300,000 Office equipment Office chairs(04) 04 3,500 14000 Simple chairs (06) 06 1,500 9000 Air condition (03) 03 40,000 120,000 Computer 01 25,000 25000 Office table(03) 03 8,000 24000 Telephone set(02) 02 1,000 2000 Computer accessories 10000 Operating Equipments 3,300,000 (b)Total cost of equipment 204,000 Initial Investment required (a+b) 3,804,000
  9. 9. G. FINANCING STRATEGY AND COST OF CAPITALOur Business will be mainly (76%) financed by equity, whereas about one third (26%) of the costwould be financed by bank loan. FINANCING Equity 2,804,000 74% Debt 1,000,000 26% Total claims 3,804,000As our business required large amount of cash and in order to start-up the business, only Equitycannot fulfill the requirements of investment. We will borrow Rs: 1,000,000 from the bank wewill pledge our personal property. Cost of equity three year risk Free rate* 12.0% Plus: Risk premium 15.0% Cost of equity 27.0% Cost of Debt 25.0% WACC 25.18%
  10. 10. KEY ASSUMPTIONSSales growth 20.00%increase in cost of rawmaterial 10.00%Increase in staff saleries 5.00%Inrease in utilities 15.00%Increase in office expenses 5.00%Depreciation:WLAN 3years lifeOFFICE EQUIPMENTS 3years lifeA.P 3years lifeSG and A growth 10.00%Interest Expense 25%% increase rent expense 10%Tax rate 20.00%
  11. 11. H. ESTIMATED FINANCIAL STATEMENT: Balance Sheet ASSETS 0 1 2 3 400,00Cash 0 1,288,133 3,285,880 5,877,219 300,00Pre-paid Month 0 330,000 363,000 700,00Total current 0 1,618,133 3,648,880 5,877,219 204,00Office Equipment 0 204,000 204,000 204,000Depreciation (officeequipments) - 68,000 136,000 204,000 204,00Office equipment, net 0 136,000 68,000 -Technical 2,400,00Equipment+Cable+UPS 0 2,930,000 2,930,000 2,930,000Depreciation - 800,000 1,776,667 2,753,333 2,400,00Technical Equipment, Net 0 2,130,000 2,396,667 176,667 500,00WLAN controller 0 500,000 500,000 500,000Depreciation - 166,667 333,333 500,000 500,00WLAN controller, Net 0 333,333 388,889 - 3,804,00TOTAL ASSETS 0 4,217,467 6,502,436 6,053,885LIABILITIES 1,000,00Notes Payable 0 1,000,000 1,000,000 1,000,000Interest Payable - 250,000 500,000 750,000 1,000,0Total liabilities 00 1,250,000 1,500,000 1,750,000EQUITY 2,804,00Owners Equity 0 2,804,000 2,804,000 2,804,000Net income 163,467 2,198,436 1,499,885TOTAL LIABILITIES AND 3,804,00EQUITY 0 4,217,467 6,502,436 6,053,885
  12. 12. Statement Of Cash Flows 0 1 2 3Net Income - 463,467 899,413 1,493,005Depreciation - 1,034,667 1,211,333 1,211,333Operating Cash Flows - 1,498,133 2,110,747 2,704,339Initial Expenditure (3,404,000) 860,000 363,000 363,000borrowing 1,000,000 250,000 250,000 250,000Equity 2,804,000Change in Cash 400,000 888,133 1,997,747 2,591,339Initial Balance 400,000 1,288,133 3,285,880Closing Balance 400,000 1,288,133 3,285,880 5,877,219Free Cash Flows (3,404,000) 838,133 1,947,747 2,904,339FREE CASH FLOW 0 1 2 3Profit after tax - 463,467 899,413 1,493,005Add back depreciation - 1,034,667 1,211,333 1,211,333 - 1,498,133 2,110,747 2,704,339Subtract capital expenditures 3,404,000 860,000 363,000 - (3,404,000) 638,133 1,747,747 2,704,339Add back after-tax interest - 200,000 200,000 200,000NET WORKING CAPITAL 1,288,133 3,285,880 5,877,219FCF (3,404,000) 838,133 1,947,747 2,904,339
  13. 13. INCOME STATEMENT 1 2 3Sales 3,840,000 4,608,000 5,529,600Gross profit 3,840,000 4,608,000 5,529,600Selling And Admin Expense:Advertising Expense 35,000 35,000 35,000Salaries Expense 900,000 945,000 992,250Utilities Expense 576,000 662,400 761,760Total Selling and Administrative Expense 1,511,000 1,642,400 1,789,010Income Before Depreciation 2,329,000 2,965,600 3,740,590Depreciation (office Equipment+wlan+ap) 1,034,667 1,211,333 1,211,333Interest Expense 250,000 250,000 250,000Rent expense 300,000 330,000 363,000Other expense 150,000 50,000 50,000Pretax Income 594,333 1,124,267 1,866,257Income Taxes - Total 118,867 224,853 373,251Net Income 475,467 899,413 1,493,005ValueWACC 25.18%Year 0 1 2 3FCF (3,404,000) 838,133 1,947,747 2,904,339Terminal 6,053,885Total (3,404,000) 838,133 1,947,747 8,958,224NPV $2,456,759.47IRR 61%

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