I am not looking for just the College Paper Lab | collegepaperslab.com

Business Finance

I am not looking for just the College Paper Lab | collegepaperslab.com

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.  Jane’s 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 space in downtown Chicago

  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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