MICROLINK INFORMATION

TECHNOLOGY COLLEGE
Department of accounting and finance

Project title: Mobile car wash business

JUN, 202

1. Source of finance
I will have two financing strategy. According to my mobile car wash project, the source finance
is assumed from owners’ equity (internal) and bank loan (external) sources and the share
percentage is stated as follows

 Owners’ equity ------------ 40%

 Bank borrowing -------------60%

Therefore; the total cost for the project is estimated to be Br. 19.230,000

Of which 4,807,750 will be covered by owners’ equity and 14,903,025 financing by bank
loan.

2. Total investments in the project (Costs and expenditures)

Total investment ………………… …………19,230,000

Land…………………………………….. 6,000,000

Building ……………………… …………..2,000,000

Machinery and equipment……….. ……..6,000,000

Raw material…………… …………….. 4,000,000

Manpower ……………………………..1,230,000

Discount cash flow……………. ………8.5%

Bank interest……………………….. ….14%

Repair and maintenance ……………… 5% of equipment cost

Depreciation expense…………………... 15%

2.1 Land and Building
The mobile car wash requires small area of land because most of the works are focuses on the
outdoor services so it requires a total plot of land of 400m 2 area.

2.2 Machinery and Equipment

1. Microfiber towels

2. Pressuer washer

3. Vapor steamer

4. Paint correction

5. Buffers

6. Polisher

7. Cleanning and deodorizing equipment

8. Brushes

9. Broadband internet line and phone line

2.3 Raw materials

The raw materials will cost the company around 4,000,000 so let see udder table 1.1 each
 Table 1.1

RAW MATERIALS AND CONSUMABLES REQUIREMENT AT FULL

CAPACITY AND ESTIMATED COST

Sr. Materials Unit of Req. TOTAL

Measure
No. No. Unit price TOTAL

1 Automatic rotating Brush pieces - - 40,000

2 Water tanker Meter - - 20,000

cubic

3 Shampoo, soap pieces - - 60,000

4 Water containment pieces 600,000

5 vehicle pieces - 2,000,000

6 Car interior cleaning and - - - 100,000

sanitizing

7 acid - - - 20,000

8 foam - - - 100,000

9 Wax Barrel - - 60,000

10 Steam machine set - - 1,000,000

Grand Total 4,000,000

2.4 Manpower requirement

The total manpower requirement, including skilled and unskilled labor is 60 people. The
corresponding total labor cost, including fringe benefits, is estimated at Birr 1,230,000. Table
1.2 shows the list of manpower required and the estimated annual labor costs.

Table 1.2

MANPOWER REQUIREMENT & LABOUR COST

Job Position Req. Salary (Birr)

No. No. Monthly Annual

1. General manager 1 31,600 378,000

2. Secretary 1 3,000 36,000

3. Head, finance & administration 1 6,000 72,000

4. driver 6 30,000 360,000

5. mechanic 3 3000 36,000

6. Electrician 1 2,000 24,000

7. reception 1 1,500 18,000

8. Car cleaners 40 4,500 54,000

9. guard 2 4,000 48,000

10. Casher 2 4,000 48,000

11. Cleaners 2 4,000 48,000

Total 60 93,600 1,230,000

3. Projected balance sheet

Mobile car wash

Projected Balance sheet

For the year ended 2012

Asset

Cash 1,230,000

Raw materials and supplies 4,000,000

Machinery and equipment 6,000,000

Building 2,000,000

Land 6,000,000

Total asset 19,230,000

Liability

Bank loan 14,903,025

Owners’ Equity 4,807,750

Total liability and equity 19,230,000

4. PROJECTED INCOME STATEMENT

 Mobile car wash

Projected income statement

For the year (2012 – 2017)

2012 2013 2014 2015 2016 2017
Sales 5,250,000 10,500,000 15,000,000 20,000,000 25,000,000 30,000,000

CGS:
Direct material 600,000 600,000 600,000 600,000 600,000 600,000
Direct labor 700,000 700,000 700,000 700,000 700,000 700,000
Direct labor 200,000 200,000 200,000 200,000 200,000 200,000
employee benefit
Factory overhead 200,000 200,000 200,000 200,000 200,000 200,000
Total CGS 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000
Gross profit 10,450,000 11,700,000 13,200,000 13,200,000 13,200,000 13,200,000

Administration
expenses:
Salary expense 100,000 100,000 100,000 100,000 100,000 100,000
Employee benefit 5,000 5,000 5,000 5,000 5,000 5,000
Utility expense 125,000 125,000 125,000 125,000 125,000 125,000
Depreciation expense 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000
For building
Depreciation expense 210,000 210,000 210,000 210,000 210,000 210,000
for Machine & equip.
Interest expense 1,960,000 2,234,400 2,547,216 2,903,826.2 3,310,361.91 3,773,812.58
4
Repair and 70,000 70,000 70,000 70,000 70,000 70,000
maintenance
Total administration
and salary expense
3,690,000 3,964,400 4,277,216 4,633,826 5,040,362 5,503,813
Operating income
6,760,000 7,735,600 8,922,784 8,566,174 8,159,638 7,696,187
Before income tax
Income tax 2366000 2707460 3122974.4 2998160.9 2855873.3 2693665.5
Income after tax 4,394,000 5,028,140 5,799,810 5,568,013 5,303,765 5,002,522
5. Projected cash flow

Cash in flow

Year Cash

2012 5,250,000

2013 10,500,000

2014 15,000,000

2015 20,000,000

2016 25,000,000

2017 30,000,000

Cash out flow

2012 2013 2014 2015 2016 2017
Raw 800,000 800,000 800,000 800,000 800,000 800,000
material
Employee’s 900,000 900,000 900,000 900,000 900,000 900,000
salary
expense
Utility 125,000 125,000 125,000 125,000 125,000 125,000
expense
Loan 2,333,333. 2,333,333. 2,333,333. 2,333,333.3 2,333,333.3 2,333,333.3
repayment 3 3 3
Interest 1,960,000 2,234,400 2,547,216 2,903,826.2 3,310,361.9 3,773,812.5
expense 4 1 8
Equipment 70,000 70,000 70,000 70,000 70,000 70,000
repair and
maintenanc
e
Employees 300,000 300,000 300,000 300,000 300,000 300,000
benefit
 Mobile car wash

Statement of projected cash flow

cash inflow
2012 2013 2014 2015 2016 2017
Cash . . . . . . . . . . . 11,250,000 13,500,000 15,000,000 15,000,000 15,000,000 15,000,000

cash outflow
Raw material . . . . . . 800,000 800,000 800,000 800,000 800,000 800,000
Employee salary
expense……………. 900,000 900,000 900,000 900,000 900,000 900,000
Utility expense……. 125,000 125,000 125,000 125,000 125,000 125,000
Loan repayment…... 2,333,333 2,333,333 2,333,333 2,333,333 2,333,333 2,333,333
3,310,361.9
Interest expense…… 1,960,000 2,234,400 2,547,216 2,903,826.24 1 3,773,812.58
Equipment repair
and maintenance….. 70,000 70,000 70,000 70,000 70,000 70,000
Employee benefit…. 300,000 300,000 300,000 300,000 300,000 300,000
Total………………. 6,488,333 6,762,733 7,075,549 7,432,160 7,838,695 8,302,146
net cash flow 4,761,667 6,737,267 7,924,451 7,567,840 7,161,305 6,697,854

Capital budgeting criteria’s

A) Net present value(NPV)

NPV = ∑Rt / (1+ i) t

Rt (cash flow) = net cash inflow – out flow at period t.

I = 8.5%
NPV = -19,230,000 + (4,761,666.67 / 1.085) + (6,737,266.7 / (1.085)2) + (7,924,450.7 /
(1.085)3) + (7,567,840.46 / (1.085)4) + (7,161,304.79 / (1.085)5) + (6,697,854.12 /
(1.085)6)
NPV = -19,230,000 + 5,269,969.3 +5,723,006.81 +6,204,116.63 + 5,460,759.1 +
4,762,593 + 4,105,416.8
NPV = -19,230,000 + 31,525,861.64
 NPV = 12,295,867.64
 The value of NPV is positive so the project is accepted.

B) Benefit cost ratio(BCR)

BCR = ∑ (cash flow / (1+ i)t) / initial investment

= 31,525,861.64 / 19,230,000

= 1.6394

 The value is positive so the project is accepted.

C) Initial ratio of return (IRR)

NPV=∑ (cash flow / (1+IRR) t) – total investment

0 = -19,230,000 + (4,761,666.67 / 1 + IRR) + (6,737,266.7 / (1 + IRR) 2) + (7,924,450.7 /

(1 + IRR) 3) + (7,567,840.46 / (1+ IRR) 4) + (7,161,304.79 / (1+IRR) 5) + (6,697,854.12 /
(1+IRR) 6)
IRR = 22.50%

 22.50% > 8.5%, so the project is accepted.

D) Payback period(PBP)

Year Cash flow Net invested cash

19,230,000
2012 11,250,000 -8,750,000
2013 13,500,000 0
2014 15,000,000 -
2015 15,000,000 -
2016 15,000,000 -
 2017 15,000,000 -

 Payback period is located between year 1 & 2, which is estimated to be 1.5 years.