Industry Model:

The industry growth and inflation rates have been verified from the internet.
The sales figures for our products have been estimated by gathering information from our
competitors about their average daily sales.
The prices of all the ingredients have been matched with their current market prices and
have been adjusted to inflation.
The quantities of ingredients required to make our products have been verified from a
cook.
The ending inventories are calculated according to the nature of the ingredients.
Following are the assumptions regarding each ingredient:
Sugar: 20% of next year requirement
Milk: 1% of next year requirement
Coffee beans: 10%
Tea: 20%
Chocolate: 10%
White butter: 10%
Flour: 10%
Eggs: 1%
We sell for 16 hours a day and we require 1 manager, 4 cooks and 6 attendants. As our
sales grow more in the later years, more attendants will be hired.
We pay for the deliverance of raw materials by 4 trucks a month. As sales grow more in
the later years, more raw materials will be needed and consequently, 5 trucks will be
needed per month.
The salaries of the workers and transportation costs have been estimated by gathering
information from the persons already running such kinds of businesses.
The costs and salaries have been adjusted to inflation.

Initial Investment:
Land and building have been purchased as such keeping in mind the location of our
business and the prevailing prices.
All other assets have been purchased as such keeping in mind their use to our business
and after checking their current market prices on the internet.
Initial investment also includes cash on hand worth Rs. 1,000,000 for immediate
purchases.
Initial investment has been financed primarily by issuing privately held common stock
while some debt financing has also been exercised.


Depreciation Schedule:
The time period over which the assets have been depreciated differs with respect to the
nature of the asset. For example, Crockery, Kitchen Utensils and Machines have been
depreciated over 5 years while Land has not been depreciated at all.
We have invested on the purchase or maintenance of our assets in the 5
th
year to
compensate for the incremental sales. Availability of new machines, fashionable furniture
and crockery in the market requires us to spend more on these assets to maintain our
market share.


Loan Amortization:
The loan has been acquired for 7 years at an annual interest rate of 13.75%. The rate has
been found on the internet and calculated as KIBOR + 2.5%. The KIBOR used is as of
April 1, 2013.

Income Statement:
The cost of goods sold includes the cost of direct materials and direct labor.
More has been spent on advertising in the early years; the advertising expense will be
curtailed in the later years as our company grows popular.
The utility bills and miscellaneous expenses have been estimated by gathering
information from existing businesses similar to ours.
The WIFI service expense has been calculated using the information given on the Wi-
tribe website.
The tax rate has been found on the internet.
Due to excess cash, we will pay dividends worth Rs. 3,000,000 in the 4
th
year.

Balance Sheet:
WIFI service license has been shown as an intangible asset.
We purchase half of our raw materials inventory on credit (shown as Accounts Payable).

Cash Flow Statement:
The indirect method has been used for the operating cash flow section.
The term Net Profit in the operating cash flow section refers to Earnings before Interest
and Taxes in the Income Statement.

Investment Appraisal:
KIBOR as of April 1, 2013 has been used to calculate Discounted Payback Period.
The cost of capital is calculated as KIBOR (as of April 1, 2013) + 2.5%.