CHAPTER IV

FINANCIAL STUDY

This chapter discusses the total investment expected for the project, as well as the total

cost of the project. It illustrates the company's capacity in terms of financial factors,

expense estimates, major business strategies and expectations. It also discusses the

financial capacity parameters which include financial ratios, net present value, rate of

return and financial analysis.

A. Project Cost

Project cost consists of the estimation of the overall cost of the project along with

financial considerations in the operation of the business. It includes all the initial

expenses needed for its service. An initial investment of Php 24,000,000.00 is necessary

to fund all the business fixed and variable cost.

 Table X
Investment Cost for Claro de Agua Spa
Description Annual Cost (Php)
Fixed Cost
Lot Expense 10,972,305.41
Building Establishment 5,080,093.00
Machines and Equipment 263,647.00
Furniture 356,595.00
Total Fixed Cost 16,672,640.41
Working Capital Requirement:
Office Supplies 136,380.00
Maintenance Supplies 301,556.00
Advertising Expense 13,000.00
Miscellaneous Expense 56,000.00
Permits and Licenses 21,900.00
Utilities Expense 246,416.50
Salary and Wages 2,181,024.00
Fringe Benefits 2,494,320.35
Total Working Capital 5,450,596.85
Total Investment Cost 22,123,237.26

Table X shows the total investment cost of Claro de Agua Spa. Having a total fixed

cost of Php 16,672,640.41 and a total of Php 5,450,596.85 working capital. The total

cost of the project sum is Php 22,123,237.26 which will be the initial investment of the

service's resources. The estimated expenditure will be used for operating expenses,

construction of the structure and equipment and supplies to be used.

B. Sources of Funds
 Claro de Agua Spa has an initial investment of Php 22,123,237.26 which would be

funded by the study's potential investors. There will be seven (10) creditors to fund the

company. Each investor shall contribute equally Php 2,212,323.00.

TableX
Source of Funds
SOURCE OF FUND AMOUNT
Neil Patrick Abiad 2,212,323.00
Bella Van Krista Antido 2,212,323.00
Rachelle Balogna 2,212,323.00
Michael John Gonzales 2,212,323.00
Bella Antido 2,212,323.00
Marie Abacan 2,212,323.00
Rits Marquez 2,212,323.00
Leilanie Arce 2,212,323.00
Sandro Dela Roca 2,212,323.00
Ching Marquez 2,212,323.00
TOTAL 22,123,237.26

Table X indicates the source of funds for this venture which will be used as an initial

investment. The owners and potential investors must jointly contribute Php 2,212,323.00.

C. Major Assumptions

Financial assumptions are the building blocks of any financial projection. Hence,

stated below are the proponent’s major assumptions that serve as the foundation for

estimating the future expenditures, expenses, and revenues of the project.

The constructions Claro de Agua Spa major consumption were as follows:

a. There will be 365 working days every regular year and 366 days every leap year.

b. Salaries and wages will increase 2.97% every year.

c. Workers will be paid on the 15th and 30th day of each month.
 d. Fringe benefits cost increases by 2.97% every year.

e. Claro de Agua Spa supplies cost (consumables) increase 2.08% every year based

on suppliers.

f. Claro de Agua Spa supplies cost (non-consumables) increase .97% every year

based on suppliers.

g. Claro de Agua Spa business permits and licenses have a fixed annual cost.

h. Utilities expense will increase by 1% annually.

i. Advertisements are expected to have no annual increase.

j. After 5 years, the business will purchase furniture and fixtures to replace obsolete

asset

k. Machineries and equipment have a salvage value of 2.4% and has a life span of 5

years

l. The Building will have no value at the end of its 50-year useful life.

m. The payback period time will be 2 years

D. Financial Statement

The financial statements are the formation of financial activities made by the

proponents in order to determine the progress of the service in financial terms. Income

statements are used for computing the total generated sales, total operating expenses and

the profit gained for a certain period.

a) Projected Income Statement

The Income Statement records all income and expenses of the Happy

Housekeeping during a specified time period. The income statement will

determine if the business is profitable or not. The projected income statement is

the estimate financial results of Happy Housekeeping and shows the business

profitability when sales and expenses have been acquired.

 Table X
Claro de Agua Spa
Projected Income Statement

For the projected years ending Dec. 31 2021-2030

a. Projected Cash Flow

b. Projected Balance Sheet