Financial Analysis for Boa Coffee

FINANCIAL ANALYSIS FOR BoA Coffee & Donut BoA Coffee & Donut set the plans to invest for the second brand building in Nui Thanh Street to expand its business in 201! "n order to reach this plan# financial director $or% together $ith all the anagers estiated the investent and future cash flo$s of pro'ects to a%e decision! "n the case of BoA Coffee# the initial cost of opening a ne$ coffee shop is 0#000 (SD for the lease# e)uipent# furnishings and inventories! *xpected cash flo$s in 201+201, are expected to  be positive and increasing! 1. The Net Present Value (NPV! "t estiate the present value of cost of pro'ect then it $ill

discount and copare $ith the initial investent! Therefore# it is necessar- to calculate the N./ to evaluate the investent opportunities! BoA Coffee ust tr- to re'ect the pro'ect $ith negative  N./ because the present value of strea of benefit $ill recover the cost of pro'ect! The principal of N./ are if N./  0 pro'ect should be accepted and if N./  0 then pro'ect re'ected bcopan-! According According to course boo%# this is the forula to calculate N./  Net Present Present Value : P =

Year

S n

(1 +r )

Cash flo"s (#SD

In$t$al %ost

Present alue fa%tor

Presen sent alue lue

Cu'ulat$ at$e PV

30#0004

30#0004 16#66

30#0004 37#654

0 1

15#000

1 0!,0,

2

1,#000

0!825

1#5,6

31,#9524

7 6

21#000 27#000

0!91 0!587

1#991 1#90,

36#014  11)*+

The N./ is positive so this pro'ect should be accept b- :ol-rood .roduct ;td because copan$ill earn profit ore than 10< 311#58 (SD4! Since the pro'ect $ill earn these return at a cost of  onl- 0#000 it ust earn a return in excess of 10
$hich the N./ is 0!

 IRR

=

2 3

×

  Profit  Cost of the project 

Year

0 1 2 7 6 IRR

Cash flo" +0000 15000 1,000 21000 27000 20<

According to the result of table# it is necessar- for the ban% to %no$ the rate of this investent! Depending on the tie and the value of cash flo$ distributions in 6 -ears# the "== of the pro'ect is 20<# $hich discount rate a%e the N./ e)ual to >ero! To have the ratio of "==# the ban%  or investor have to recalculate the N./ e)uation of BoA! -. Pa/a%0 er$o2! "t is the ethod to calculate the length of tie re)uired before the total cash

inflo$ is e)ual to the original cash of copan-! 4,051

7 -ears ?

15,709

@ 7!2 -ears

As can be seen# this pro'ect $ill ta%es about 7 -ears and 2 onths BoA Coffee & Donut can  pa-bac% for the investent! Therefore# copan - can invest to bring ore benefit fro open ne$ shop in the short ter! According to three ethods# BoA Coffee & Donut can deterine the good investent to get ore profit and easure the perforance of copan-! "n conclusion# the pro'ect of opening ne$ shop is effective and $ill bring ore profit for BoA! Thus# anager can a%e decision to facilitate the ipleentation of this pro'ect!