assignment financial planning smile land amusement park

- Business Department: Surveying customer''''s business processes, consulting business, consulting management process for customers, consulting and implementing ERP solutions - Consulting a

Banking Academy of Vietnam International School of Business

ASSIGNMENT

FINANCIAL PLANNING Smile-land Amusement

Park

Group 4: Phan Anh Dũng

Vũ Hoàng Long Nguyễn Kiều Linh Đặng Hoàng Hải Dương Quỳnh Phương Class: CityU9A

Mark:

1 Business information

Amusement Park is a diversified business model that can combine many different services That diversity will bring huge profits to investors, so the return of capital and development is very fast Company name: Smile-land Joint Stock Company

Business Features: Relax is an entertainment center with catering services Is a business model with a large investment scale in both modern equipment and service style

Distribution strategy:

- Direct distribution from supplier to customer

-Organize a flexible and dynamic distribution process

appropriate location they want

Due to the small size of the company and little capital, in the early years of its establishment, the company chose the customer market in Da Nang as the target market Nam Dinh population 1,780,393 people (in 2019), this is a young city developing with the trend of industrialization and modernization of the country, so the target customer group of the amusement park is from the age of 5 to 30 years old

1.2 Products & Services:

In Smile-land we built includes many different specialized areas, arranged in the most appropriate way:

1 Game area: Divided into 2 main areas:

+ Children's play area

+ Playground for teenagers and older

2 Dining area: Located on the same floor as the game area: Provide dishes with the motto: convenient, delicious, nutritious, cheap" Especially, the working line at the dining area is very professional and has a clear process, creating freedom for customers when choosing dishes

3 Karaoke area: This area includes in addition to modern technical facilities, it is also equipped with soundproofing equipment, which does not affect other areas

4 Refreshing milk tea area: Arranged with open space

* Functions of the departments:

- Enterprise solution department: Consulting and deploying information systems for financial management and corporate governance, installing, training in system user manuals, designing and developing products according to special requirements of client's enemies

- Business Department: Surveying customer's business processes, consulting business, consulting management process for customers, consulting and implementing ERP solutions

- Consulting and customer support department: Consulting for customers by phone, Email, web and at the customer's headquarters when there is a need for advice Because of the success of our customers, we do not stop at the sales stage, but want to bring true meaning to customers

- Product Development Research and Development Department: Research and develop new products based on the most advanced technology with module functions that are always expanding as well as improving the career and analytical ability of the program Analyze and evaluate current products and services of the Company in order to adjust to suit the needs of customers

- Sales and Market Development Department: Carrying out business activities effectively; survey and assess potential customers and find out arising needs of customers; expand the market using the Company's services; Establishing and maintaining good relationships with customers, taking care of customers periodically to improve the company's reputation and quality Propagating and promoting the company's products and services; Analyze and implement customer care plans in the best way

- Administration Department: Organizing and implementing office work, administrative procedures, record keeping; Arrange and organize activities in the company; Supervise the

- Business goals: the enterprise sets a business goal to have a net profit in the second year

of about VND 50,000,000, payback within 3 years when the amusement park comes into operation, open 1 more branch in the next year within a year in an area with new potential

- Personal goals of the shop owner: independence in business, financial autonomy, serving the entertainment needs of young people in the area, creating jobs with stable income for sales staff

1.5 Successful factors

- From 2010 up to now, the number of visitors to Nam Định for sightseeing has achieved an average increase of 6%/year; Income from tourism increased by an average of 19% per year with its location near the sea, diverse cuisine and many famous historical sites

- No large-scale amusement park has been built or planned to be built recently

- The province has young, abundant and qualified human resources: people of working age are about 1 million people, accounting for 60% of the population

- The cost will be low because the average income of the population here is only about 80% of that in urban areas such as Hanoi and the land price is significantly lower

=> Nam Dinh is an area with a lot of potential to develop and monopolize the entertainment industry market at the moment with low capital costs

II Proforma business plan (5 years)

1 Prices

* Price strategy:

Amusement area: Ranging from 5,000 to 50,000 VND / turn

Food court: Ranging from 5000 to 25,000 VND/dish

Karaoke area: Ranging from 60,000 to 80,000 VND/hour

Milk tea area: Ranging from 5,000 to 15,000 VND/sp

There are product packages such as: Dining with Combo packages

Distributing coupons to customers: Distributing 10% discount coupons for bills of 100,000 or more for the next time (for food court)

have an income of 5 million-7 million, only 10.5% have an income of over 7 million Therefore, our pricing strategy is to match the market price

- The majority of customers are willing to spend 100-300,000 VND for each visit to the amusement park, besides, the number of customers who only spend from 50-100 thousand also accounts for 36.7% and less than 50 thousand accounts for 10, 5% Therefore, the price we offer is at an average level so that everyone can still come and play

- Especially, the target customers are teenagers, so the high price will not attract this number of customers

- The product service price list will be described in the accompanying Excel file

2 Predicting cash flow

2.1 Expected revenue of the game area:

Product price list, revenue by region: Excel

The revenue of the enterprise is equal to the total revenue of 4 areas (a), (b), (c), (d)

UNIT: 1.000 VNĐ

Year Game zone Eating zone Bubble tea zone Karaoke zone Total sale

3 Total expense

Facility construction costs 4.000.000.000

3.2 Depreciation

Asset depreciation

TV screen 49.000.000

Total 1.734.400.000

Depreciation for 5 years, average depreciation per year is: 346,880,000 VND

3.3 Staff costs

Into money

Total

119.000.000

Excerpt from: Social insurance, Health insurance, and Unemployment insurance:

22%*119.000.000=40.920.000

Total personnel cost for 1 year is: 145,180,000 VND

Numerical order Items A month A year

Unit: 1000VND

3.5 Marketing and promotion expenses (Unit: 1000VND)

Marketing mix Unit(1000đ) % Total budget

32.21%

Communications program 64.420

36.82%

Hire a company to print posters and

30.97%

Total investment cost for the project: 7,666,448,980 vnd

Enterprises with equity capital of about: 3,666,448,980 vnd

Loan interest rate is about 7%/year

The interest payment period is 5 years

Annual schedule of principal and interest payment:

Year principal payment interest payment remaining principal Total payment per year

3.7 Estimated total cost for the first year

Fixed asset depreciation 346.880.000 Marketing & promotion 174.980.000

4 Pro Forma Income Statement for 5 years

Investment

7.666.448.98

0

revenue

3.958.380.00

0

4.342.752.00

0 4.754.095.20

0 5.195.106.72

0 5.668.753.392

Selling and

manageme

nt expenses

living 174.000.000 174.000.000 174.000.000 174.000.000 174.000.000

Loan

interest

payment

1.080.000.00

0

1.024.000.00

0 968.000.000 912.000.000 856.000.000 Maintenanc

Depreciatio

n 346.880.000 346.880.000 346.880.000 346.880.000 346.880.000

EBIT

1.537.340.00

0

2.027.692.00

0 2.510.035.20

0 3.017.046.72

0 3.536.693.39

2

Net income

1.429.726.20

0

1.885.753.56

0 2.334.332.73

6 2.805.853.45

0 3.289.124.855

5 Break-even point

Accumulatio

n of profit

after tax

-7.666.448.98

0

-6.236.722.78

0

-4.350.969.22

0

-2.016.636.48

4 789.216.96 6 4.078.341.82

0

=> The company starts to break even from the fourth year => Breakeven time:

3+ 2,016,636,484/2,805,853,450 = 3.7 months = 3 years 8 months 12 days

- Suppose each customer at the park gives Smile-land 150,000 VND

=> The amusement park needs to attract 51,110 customers within 3.7 years to break even

III Firm cost of capital

- Given data:

• But our corporation doesn’t issued bond and stock

β of the service and entertainment industry in Vietnam is now 0.21

- Capital structure:

=> WACC = 47,82% x 7% + 52,18% x 7% x (1-20%) = 6.86%

IV Evaluate

1 NPV, IRR

- Operating cash flow of 5 years:

Net Income 1.429.726.200 1.885.753.560 2.334.332.736 2.805.853.450 3.289.124.855

Depreciation 346.880.000 346.880.000 346.880.000 346.880.000 346.880.000

- The total cash flow for each year of this project ( Base scenario )

Sale 3.958.380.000 4.342.752.000 4.754.095.200 5.195.106.720 5.668.753.392

Fixed cost 717.060.000 717.060.000 717.060.000 717.060.000 717.060.000 Variable

cost 1.704.980.0001.598.000.0001.527.000.0001.461.000.0001.415.000.000

EBIT 1.536.340.000 2.027.692.000 2.510.035.200 3.017.046.720 3.536.693.392

Tax (7%) 107.543.800 141.938.440 175.702.464 211.193.270 247.568.537

Net

Income 1.428.796.200 1.885.753.560 2.334.332.736 2.805.853.450 3.289.124.855

Operating

cash flow 1.775.676.2002.232.633.5602.681.212.7363.152.733.4503.636.004.855 Change in

Spending 7.523.300.000

Total

project

cash flow

-7.666.448.9801.775.606.200 2.232.633.560 2.681.212.736 3.152.733.450 3.779.153.835

NPV 3.297.550.741

Payback period 3,3

- Therefore: NPV > 0 ; IRR > WACC

=> A profitable investment and that profit is higher than the initial cost

=> Accept the project

2.1 Sensitivity analysis

In this case, the impact of the company's sales and fixed costs on the company's profits will be assumed The analysis isolates each of these fixed revenues and costs and records the possible outcomes

- Assume that sales will be 1% higher/lower than baseline values Other inputs remain constant, the cash flows will be as follows:

• Higher case:

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Sale 3.997.963.800 4.386.179.520 4.801.636.152 5.247.057.787 5.725.440.926

Variable

EBIT 1.575.923.800 2.071.119.520 2.557.576.152 3.068.997.787 3.593.380.926

Net Income 1.465.609.134 1.926.141.154 2.378.545.821 2.854.167.942 3.341.844.261

Operating

Change in

Spending 7.523.300.000

Total

project cash

flow

-7.666.448.980 1.812.489.134 2.273.021.154 2.725.425.821 3.201.047.942 3.831.873.241

% Change in NPV 5,50%

Sensitivity of NPV 5,5

• Lower case: Sale price -1% (Excel)

% Change in NPV -5,49%

Sensitivity of NPV -5,49

An increase in the sales price by 1% will result in an increase in the NPV by 5,50%, and if the sales price drops by 1%, the NPV of a project will decrease by -5,49%

- Assume that fixed cost will be 1% higher/lower than baseline values Other inputs remain constant, the cash flows will be as follows:

• Higher case:

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Sale 3.958.380.000 4.342.752.000 4.754.095.200 5.195.106.720 5.668.753.392

Fixed cost

Variable

EBIT 1.529.169.400 2.020.521.400 2.502.864.600 3.009.876.120 3.529.522.792

Net Income 1.422.127.542 1.879.084.902 2.327.664.078 2.799.184.792 3.282.456.197

Operating

Change in

Spending 7.523.300.000

Total

project cash

flow

-7.666.448.980 1.769.007.542 2.225.964.902 2.674.544.078 3.146.064.792 3.772.485.177

% Change in NPV -0,83%

Sensitivity of NPV -0,83

• Lower case: Fixed costs -1% (Excel)

% Change in NPV -0,54%

Sensitivity of NPV -0,54

An increase in the fixed costs by 1% will result in an increase in the NPV by-0,83% through the increase of taxes through years, and if the fixed costs drop by 1%, the NPV of the project will still increase by -0,54%

=> Sensitivity analysis shows that the NPV of a project is most vulnerable to the change in the sales price and less vulnerable to the change in fixed costs

As above, we should estimate both sales price changes as accurately as possible because they have a remarkable impact on the net present value of a project

2.2 Scenario analysis:

COMPETING SCENARIO

New competitor enter the market

Sale will be decreased by 15%

Variable cost will increase to 50% of sale

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Sale 3.958.380.000 4.342.752.000 4.754.095.200 5.195.106.720 5.668.753.392

Fixed cost

cost

EBIT -442.850.000 -143.684.000 132.987.600 419.493.360 702.316.696

Net Income -411.850.500 -133.626.120 123.678.468 390.128.825 653.154.527

Operating

Change in

NWC -143.148.980 143.148.980

Capital

Spending

-7.523.300.000

Total

project cash

flow

-7.666.448.980 -64.970.500 213.253.880 470.558.468 737.008.825 1.143.183.507

According to the given data, it showed that with a 50% increase in variable costs and a 15% decrease in sales, the first year's total cash flow was under zero If variable costs go up, revenue will decrease NPV has also declined So, if more competitors enter the Nam Dinh market, the business will face a heavy loss

in the first year Smile-land needs to prepare solutions to hold back customers to avoid the fall in sales number and avoid dangerous cases leading to bankruptcy of the business As such, each different ratio assumption will be a different case

V Overall

It can be seen that with the advantages of price and market opportunities, this is a super profitable project and also very high risk through the change of NPV when the sale decreases by only 1%

My team will most likely invest in this project, although the future profitability and development of the Smile-land amusement park project is there, but there will be some adjustments to minimize financial risk

Sources

1 https://namdinh.gov.vn/portal/Pages/2020-10-12/Tong-quan-ve-Nam-Dinhjux7zd.aspx

2 https://drive.google.com/drive/u/0/folders/1Bz8pzBEs3h-D-qcPVWvX2WE4Nep7UeBv

3 https://dautu.io/he- so -beta- - - la gi he-so -beta-cua- cac -nganh-tai-viet-nam.html

4 https://www.educba.com/cost-of-equity-formula/

5 https://govalue.vn/wacc/

6 https://vietnamtourism.gov.vn/post/36468

7 https://khuvuichoitreem.com.vn/kinh-phi-dau- -khu-vui-choi-tre- tu