Feasibility Study: Proposed Expansion Of Rob’s Furniture Restoration Ltd

The report has been prepared with an intention to analyse the feasibility of proposed expansion strategy with directors of Rob’s Furniture Restoration Limited (RFR), a family owned business with 3 directors on board. The company is seeking an opportunity to expand its business and has accordingly consulted the Accounts team to conduct a feasibility study of the project and comment on the same. The feasibility study has been annexed to the report and the project is feasible based on the calculations detailed in annexure. The Net Present value stands at $ 1,234,455.

The assumptions under the said computation have been detailed here-in-below:

Trip cost is sunk cost and $37,500 has not been considered;
Reimbursed expenditure is not considered ;
Staff salary of 3 additional staff is considered;
Increase in salary takes place from second year;
The price offered by other party for the property in Hornsby is not taken into consideration;
The sale value of premise includes the sale price of building and has not been considering separately;
The increase in working capital is realised at the end of the period.

Sl No	Particulars	Year 0 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Year 1	Year 2	Year 3	Year 4	Year 5	Terminal Value
1	Increased Revenues		750000	780000	840000	900000	960000
2	Cancellation Agreement (Net of Tax)	-4900
3	Increase in Maintenance cost		6700	6834	6970.68	7110.094	7252.295
4	Land Cost	-2430000
5	Cost of Equipment	-260000
6	Training Cost (Net of Tax)	-39200
7	Wage Cost for 3 employees		224100	229702.5	235445.1	241331.2	247364.5
8	Valuation of Premise post 5 Year							4250000
9	Depreciation of old equipment		3600	3600	3600	3600	3600
10	Depreciation of New Equipment		37000	37000	37000	37000	37000
11	Saving in Rent Cost		85000	85000	85000	85000	85000
12	Depreciation on Building		66500	61845	57515.85	53489.74	49745.46
13	Increase in Working Capital		45000	1800	3600	3600	3600	57600
14	Residual Value of Machine							75000
15	Net Cash flow before Tax	-2734100	282100	354218.5	410868.4	468869	526437.8	4382600
16	Tax Impact		84630	106265.6	123260.5	140660.7	157931.3	39780
17	Cash Flow Post Tax	-2734100	197470	247953	287607.9	328208.3	368506.4	4342820
18	Depreciation (Add Back)		107100	102445	98115.85	94089.74	90345.46
19	Net Cash flow		304570	350398	385723.7	422298	458851.9	4342820
20	Discounting Factor	1	0.900901	0.811622	0.731191	0.658731	0.593451	0.593451328
21	Present Value of Cash Flows	-2734100	274387.4	284390.8	282037.9	278180.8	272306.3	2577252.297
22	Net Present Value	1234455.451