Reference no: EM133111597
You are planning to open a bakery in front of an educational institution in which around 4,000 students are studying. The key business features are as under:
-Daily footfalls around 800 with growth of 15% per annum
-Conversion rate 75%
-Average spend Rs 160
-Products offered apart from routine bakery items are coffee, tea both hot and cold
-Investment required Rs 14 Lakhs comprising of equipment Rs 10 Lakhs and Furniture and Fixtures Rs 4 Lakhs
-Depreciation on equipment is @ 20% pa on SLM
-Place on monthly rental of Rs 18,000 with a security deposit of Rs 5 Lakhs not included in the above investment required.
-Debt Equity of total investment is 1.5 : 1
-Interest on Debt is @ 11.5% per annum and the debt is repayable in 5 equal installments after a moratorium of 1 year
-Monthly shop expenses Rs 45,000
-Margin on products sold is 30%
-Income Tax is paid @ 20%
-Determine the ROI & ROE
-What business risks due you perceive in the above business, what is the probability of the risk arising and its likely impact and how do you propose to mitigate such risk. Explain through a columnar table.
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