Free Elective Exercise No. 1-Balanced

8/6/2019 Free Elective Exercise No. 1-Balanced

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Rocky Mountain Caf Confidential Information - Not for Disclosure

Coffee Service Centers Note - These are projections based on assumptions, actual results may vary based on performance

List of Assumptions

1. Marketing Assumptions

Number of Operating Days / Month 30Number of Cups Sold / Day (Month 1) 30

Selling Price / Cup (PhP) 15.00

COGS / Cup (PhP) 4.00

Yearly Price Increase 8%

Credit Terms to Buyers 0

FINANCIAL ANALYSIS

2. Financial Assumptions Net Present Value 54,4Yearly Cost Increase 7% Internal Rate of Return

Royalty Fees 5% Payback Period in Years

Corporate Income Tax 35%

Exchange Rate US$-PhP 42

Inflation 7%

Interest Rate 12%


2/17

ABC CorporationService Centers

1 2 3 4 5 6 7 8

Total Number of Cups Sold 774,000 1,134,000 1,494,000 1,854,000 2,214,000 2,574,000 2,934,000 3,294,000

Revenues 10,057,500 18,200,700 25,657,209 34,068,446 43,531,535 54,152,522 66,047,143 79,341,663

Royalties - - - - - - - -

Cost of Goods Sold 2,682,000 4,853,520 6,841,922 9,084,919 11,608,409 14,440,673 17,612,571 21,157,777

Gross Income 7,375,500 13,347,180 18,815,287 24,983,527 31,923,126 39,711,850 48,434,571 58,183,886Gross Profit Margin 73% 73% 73% 73% 73% 73% 73% 73%

Fix Costs 1,811,400 2 ,021,610 2,516,735 3,038,118 3 ,587,178 4 ,165,412 4,774,398 5,415,802

Net Profits before Taxes 5,564,100 11,325,570 16,298,552 21,945,409 28,335,948 35,546,438 43,660,174 52,768,084

Net Profit Margin 55% 62% 64% 64% 65% 66% 66% 67%

Taxes 834,615 1,698,836 2,444,783 3,291,811 4,250,392 5,331,966 6,549,026 7,915,213

Net Profits After Taxes 4,729,485 9,626,735 13,853,769 18,653,598 24,085,556 30,214,472 37,111,148 44,852,871

Initial Investment @ Year 1 4,733,999

Cummulative NPBT - 10 Years 352,785,993

Cummulative NPAT - 10 Years 299,868,094

Payback (months) 1.22

Internal Rate of Return 134%


3/17

9 10

3,654,000 4,014,000

94,173,785 110,693,629

- -

25,113,009 29,518,301

69,060,775 81,175,328

73% 73%

6,091,384 6,803,000

62,969,391 74,372,328

67% 67%

9,445,409 11,155,849

53,523,982 63,216,479


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Financing Structure

RMC Investment Component PHP

Saeco Royal Coffee Machines 28 75,000 2,100,000

Saeco Steel Manual Espresso 0 250,000 -

Necta Colibri Automatic Espresso 1 266,666 266,666

Bunn Airpot Kit (1 Brewer + 2 Air Pots) 4 71,000 284,000

VKI Piccolina Coffee Machines 10 133,333 1,333,333 3,983,999 43

RMC Black Base Cabinet 10 92,651 Avera

RMC Water Pump 10

RMC Water Filter 10

RMC Condiment Racks 10

RMC Waste Basket 10

RMC Franchise Fee 1 750,000 750,000

Exclusive Territory for 10 Years 1RMC Technical & Marketing Training Program 1

RMC Technical & Marketing Support Program 1

RMC Monitoring Program 1

4,733,999

SOURCES OF CAPITAL PHP

Equity 100% 4,733,999

Debt 0% -

4,733,999

Loan Amortization (US$) Month 1 2 3

Principal - -

Monhtly Amortization - - Balance to Pay - -

Interest expenses - -

Monthly Payment PhP - -


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Operating Expenses

Inflation 7% Quantity/ Annually

Description Allocation Monthly Factor 2010 2011 2012 2013 2014

Space Rental Per m2 100 100.00

Space rental 1 10,000 12 120,000 128,400 137,388 147,005 157,296

120,000 128,400 137,388 147,005 157,296

Telecommunications

Main Line 1 800 12 9,600 10,272 10,991 11,760 12,584

Cell Phone 2 350 12 8,400 8,988 9,617 10,290 11,011

1,150 18,000 19,260 20,608 22,051 23,594

Utility Services

Electricity 1 5,000 12 60,000 64,200 68,694 73,503 78,648

Gazoline 1 10,000 12 120,000 128,400 137,388 147,005 157,296

180,000 192,600 206,082 220,508 235,943

Salaries and Benefits

Technician & Router 1 10,000 13 130,000 139,100 148,837 159,256 170,403

Marketing 1 20,000 13 260,000 278,200 297,674 318,511 340,807

390,000 417,300 446,511 477,767 511,210

Marketing & Office Supplies

Marketing Material 1 10,000 12 120,000 128,400 137,388 147,005 157,296 Office Supplies 1 5,000 12 60,000 64,200 68,694 73,503 78,648

180,000 192,600 206,082 220,508 235,943

Professional Services

Accounting 1 25,000 13 325,000 347,750 372,093 398,139 426,009

Auditing Services 1 50,000 1 50,000 53,500 57,245 61,252 65,540

375,000 401,250 429,338 459,391 491,549

ear y , , , , , , , , , ,

Monthly 105,250 112,618 120,501 128,936 137,961


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AMORTIZATION EXPENSE

Amortization AMORTIZAPhP Period Year 1 Year 2 Year 3 Year 4 Year 5

Project Set-up and Technology Transfer Cost

RMC Franchise Fee 750,000 10 75,000 75,000 75,000 75,000 75,00

RMC Technical & Marketing Training Program - 10 - - - -

RMC Technical & Marketing Support Program - 10 - - - -

RMC Monitoring Program - 10 - - - -

75,000 75,000 75,000 75,000 75,00

Accum. Ammortization 75,000 75,000 75,000 75,000 75,00

NET BOOK VALUE (75,000) (75,000) (75,000) (75,000) (75,00


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SCHEDULE OF PROPERTY & EQUIPT. & DEPRECIATION

Inflation Rate 1 1.07 1.14

COSTS Unit Cost Total Costs

Qty. PhP Yr. 0 Year 1 Year 2 Year 3 Ye

VKI Piccolina Coffee Machines 1 4,733,999 4,733,999 4,000,000 4,200,000 4,410,000

Total Acquisitions for the year 4,733,999 4,000,000 4,200,000 4,410,000

Total Cummulative Acquisitions 4,733,999 8,733,999 12,933,999 17,343,999

DEPRECIATION EXPENSE Useful Lives Total Costs

VKI Piccolina Coffee Machines 10 4,733,999 473,400 473,400 473,400

New Machine Investments 4,000,000 400,000 400,000

4,200,000 420,000

4,410,000

4,630,500

4,862,025

5,105,126

5,360,383

5,628,402

5,909,822

6,205,313

55,045,569

Total Depreciation expense 473,400 873,400 1,293,400

Accum. Depreciation 473,400 1,346,800 2,640,200

NET BOOK VALUE 8,260,599 11,587,199 14,703,800


8/17

ABC Corporation

Service Centers

Income and Expense Statement

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7

Revenue from Coffee Services January February March April May June July

Number of Coffee Stations 0 10 20 30 43 43 43 43

Number of Operating Days / M Growth 30 30 30 30 30 30 30

Cup Solds / Days 0 50 50 50 50 50 50 50

Total Number of Cups Sold per Month 15,000 30,000 45,000 64,500 64,500 64,500 64,500 Sell ing Price / Cup 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00

Income Before Royalties PHP 225,000 450,000 675,000 967,500 967,500 967,500 967,500

Payment of Royalties 0% - - - - - - -

Income After Royalties 225,000 450,000 675,000 967,500 967,500 967,500 967,500

Revenue from We Deliver Franchises

Number of Coffee Stations - - - - - - -

Number of Operating Days / M Growth 30 30 30 30 30 30 30

Cup Solds / Days 0 100 100 100 100 100 100 100

Total Number of Cups Sold per Month - - - - - - -

Sell ing Price / Cup 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00

Income Before Royalties PHP - - - - - - -

Collection of Royalties 5% - - - - - - -Income After Royalties - - - - - - -

Total Income After Royalties 225,000 450,000 675,000 967,500 967,500 967,500 967,500

Cost of Goods Sold

Cost / Cup 4.0 4.00 4.00 4.00 4.00 4.00 4.00 4.00

Total Cost of Good Sold PHP 60,000 120,000 180,000 258,000 258,000 258,000 258,000

Gross Income PHP 165,000 330,000 495,000 709,500 709,500 709,500 709,500

Gross Profit Margin 73% 73% 73% 73% 73% 73% 73%

Fix Costs

Space Rental 10,000 10,000 10,000 10,000 10,000 10,000 10,000

Telecommunications 1,500 1,500 1,500 1,500 1,500 1,500 1,500

Electricity 5,000 5,000 5,000 5,000 5,000 5,000 5,000

Gazoline 10,000 10,000 10,000 10,000 10,000 10,000 10,000

Salaries & Benefits 32,500 32,500 32,500 32,500 32,500 32,500 32,500

Marketing & Off ice Supplies 15,000 15,000 15,000 15,000 15,000 15,000 15,000

Professional Services 31,250 31,250 31,250 31,250 31,250 31,250 31,250

105,250 105,250 105,250 105,250 105,250 105,250 105,250

Operating Income 59,750 2 24,750 3 89,750 604,250 6 04,250 6 04,250 604,250

Add(deduct) Other Income (Expenses)

Capital & Interest Fees - - - - - - -

Net Income Before Tax 59,750 224,750 389,750 604,250 604,250 604,250 604,250

Income Tax 0% 0 0 0 0 0 0 0

Net Income After Tax PHP 59,750 224,750 389,750 604,250 604,250 604,250 604,250

Net Profit Margin 27% 50% 58% 62% 62% 62% 62%


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Collection of Receivables

Revenues 225,000 450,000 675,000 967,500 967,500 967,500 967,50

Add: Accounts Receivable, Beg. - - - - - -

Total 225,000 450,000 675,000 967,500 967,500 967,500 967,50

Accounts Receivable,End 0 - - - - - -

Collection of Receivables 225,000 450,000 675,000 967,500 967,500 967,500 967,50

Payment of Expenses

Total Expenses 119,000 179,000 239,000 317,000 317,000 317,000 317,00

Less: Non-cash Expenses - - - - - -

Cash Expenses 119,000 179,000 239,000 317,000 317,000 317,000 317,00Add: Accounts Payable, Beg. Bal. - - - - - -

Total 119,000 179,000 239,000 317,000 317,000 317,000 317,00

Less: Accounts Payable, End - 1 mo.of profe - - - - - -

Payment of Expenses 119,000 179,000 239,000 317,000 317,000 317,000 317,00


10/17

ABC Corporation

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Revenue from Coffee Services

Number of Coffee Stations 20 43 63 83 103 123 143

Number of Operating Days / Mo Growth 30 30 30 30 30 30

Cup Solds / Days 0 50 50 50 50 50 50

Total Number of Cups Sold / Year 774,000 1,134,000 1,494,000 1,854,000 2,214,000 2,574,00

Selling Price / Cup 15.00 15.00 16.05 17.17 18.38 19.66 21.04

Income Before Royalties 10,057,500 18,200,700 25,657,209 34,068,446 43,531,535 54,15

Payment of Royalties 0% - - - - -

10,057,500 18,200,700 25,657,209 34,068,446 43,531,535 54,15

Revenue from We Deliver Franchises

Number of Coffee Stations - - - - -

Number of Operating Days / Month 30 30 30 30 30

Cup Solds / Days 100 100 100 100 100

Total Number of Cups Sold / Year - - - - -

Selling Price / Cup 10.00 10.00 10.70 11.45 12.25 13.11

Income Before Royalties - - - - - Collection of Royalties 5% - - - - -

- - - - -

Total Income After Royalties 10,057,500 18,200,700 25,657,209 34,068,446 43,531,535 54,15

Cost of Goods Sold

Yearly Cost Increase 7%

Cost / Cup 4.00 4.00 4.28 4.58 4.90 5.24 5.61

Total Cost of Good Sold 2,682,000 4,853,520 6,841,922 9,084,919 11,608,409 14,440,67

Gross Income 7,375,500 13,347,180 18,815,287 24,983,527 31,923,126 39,711,85

Gross Profit Margin 73% 73% 73% 73% 73% 73%

Fix Costs

Space Rental 120,000 128,400 137,388 147,005 157,296 16

Telecommunications 18,000 19,260 20,608 22,051 23,594 2

Electricity 60,000 64,200 68,694 73,503 78,648 8

Gazoline 120,000 128,400 137,388 147,005 157,296 16

Salaries & Benefits 390,000 139,100 148,837 159,256 170,403 18

Marketing & Office Supplies 180,000 192,600 206,082 220,508 235,943 25

Professional Services 375,000 401,250 429,338 459,391 491,549 52

Amortization 75,000 75,000 75,000 75,000 75,000 7

Depreciation 473,400 873,400 1,293,400 1,734,400 2,197,450 2,68

Total Fix Costs 1,811,400 2,021,610 2,516,735 3,038,118 3,587,178 4,16

Net Income Before Investment 5,564,100 11,325,570 16,298,552 21,945,409 28,335,948 35,54

4,000,000 4,200,000 4,410,000 4,630,500 4,862,025 5,10

Payment of Loan Principal - - - - -

Payment of Loan Interest - - - - -

Net Income After Investment 1,564,100 7,125,570 11,888,552 17,314,909 23,473,923 30,44Corporate Taxes 30% 469,230 2,137,671 3,566,566 5,194,473 7,042,177 9,1

Net Income After Taxes PhP 1,094,870 4,987,899 8,321,986 12,120,436 16,431,746 21,30

Retained Earnings 1,094,870 6,082,769 14,404,755 26,525,192 42,956,938 64,26

Net Profit Margin (incl investment) 11% 27% 32% 36% 38% 39%

Net Profit + Depreciation + Amortization 2,112,500 8,073,970 13,256,952 19,124,309 25,746,373 33,199,9

Net Profit Margin ++ 21% 44% 52% 56% 59% 61%


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Net Profit (without investment) 55% 62% 64% 64% 65% 66%

Revenues 10,057,500 18,200,700 25,657,209 34,068,446 43,531,535 54

Add: Accounts Receivable, Be 1.41 - - - -

Total 10,057,500 18,200,700 25,657,209 34,068,446 43,531,535 54

Accounts Receivable,End 0 - - - - -

Collection of Receivables 10,057,500 18,200,700 25,657,209 34,068,446 43,531,535 54

Total Expenses 4,493,400 6,875,130 9,358,657 12,123,037 15,195,588 18

Less: Non-cash Expenses 548,400 948,400 1,368,400 1,809,400 2,272,450 2

Cash Expenses 3,945,000 5,926,730 7,990,257 10,313,637 12,923,138 15

Add: Accounts Payable, Beg. Bal. - 828,000 1,351,410 1,446,009 1,547,229 1

Total 3,945,000 6,754,730 9,341,667 11,759,646 14,470,367 17

Less: Accounts Payable, End 828,000 1,351,410 1,446,009 1,547,229 1,655,535 1


12/17

Payment of Expenses 3,117,000 5,403,320 7,895,658 10,212,416 12,814,832 15


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Balance Sheet

Year 1 Year 2 Year 3 Year 4 Year 5

Assets

Short Term AssetsCash 2,940,500 11,068,650 22,282,530 37,941,493 58,601,699

Receivables - - - - -

Total Other Current Assets 2,940,500 11,068,650 22,282,530 37,941,493 58,601,699

Property and Equipment

VKI Piccolina Coffee Machines 4,733,999 8,733,999 12,933,999 17,343,999 21,974,499

Total 4,733,999 8,733,999 12,933,999 17,343,999 21,974,499

Less: Accum. Depreciation (473,400) (1,346,800) (2,640,200) (4,374,600) (6,572,050)

Net 4,260,599 7,387,199 10,293,800 12,969,400 15,402,450

Pre-operating Expenses (Net) (75,000) (150,000) (225,000) (300,000) (375,000)

Total Assets 7,126,099 18,305,849 32,351,329 50,610,893 73,629,149

Liabilities & Shareholder Equity

Liabilities

Accounts Payable 828,000 1,351,410 1,446,009 1,547,229 1,655,535

Income Tax Payable 469,230 2,137,671 3,566,566 5,194,473 7,042,177

Total Current Liabilities 1,297,230 3,489,081 5,012,574 6,741,702 8,697,712

Bank Loan - - - - -

Total Liabilites 1,297,230 3,489,081 5,012,574 6,741,702 8,697,712

Shareholder Equity

Capital Stock 4,733,999 8,733,999 12,933,999 17,343,999 21,974,499

Retained Earnings 1,094,870 6,082,769 14,404,755 26,525,192 42,956,938 Total Shareholders' Equity 5,828,869 14,816,768 27,338,755 43,869,191 64,931,437

Total Liabilities and Equity 7,126,099 18,305,849 32,351,329 50,610,893 73,629,149

DIFFERENCE - - - - -


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PROJECTED CASH FLOWS STATEMENTS (PHP)

Year 0 Year 1 Year 2 Year 3 Year 4 Yea

Cash Flows from (to) Operating Activities

Collection of receivables 10,057,500 18,200,700 25,657,209 34,068,446 43,5

Payment of expenses (3,117,000) (5,403,320) (7,895,658) (10,212,416) (12,

Payment of income tax - (469,230) (2,137,671) (3,566,566) (5,1

- 6,940,500 12,328,150 15,623,880 20,289,464 25,5

Cash Flows from (to) Investing Activities

Acquisition of property and equipment (4,733,999) (4,000,000) (4,200,000) (4,410,000) (4,630,500)

Payment of pre-operating expenses - - - - -

(4,733,999) (4,000,000) (4,200,000) (4,410,000) (4,630,500) (4,8

Cash Flows from (to) Financing Activities

Capital contribution from stockholders 4,733,999 - - - - Proceeds from bank loan - - - - - Payment of interest - - - - -

Payment of principal loan - - - - -

4,733,999 - - - -

Net Cash Flows - 2,940,500 8,128,150 11,213,880 15,658,964 20,6

Cash at Beginning of Year - - 2,940,500 11,068,650 22,282,530 37,9

Cash at End of Year - 2,940,500 11,068,650 22,282,530 37,941,493 58,6

Cash Flows for Financial Analysis

Net Cash Flows (4,733,999) 2,940,500 8,128,150 11,213,880 15,658,964 20,6

Payback Period (1,793,499) 6,334,650.65 - -

1.00 0.22

Documents

Free Elective Exercise No. 1-Balanced