INTRODUCTION

WINGS ACADEMY:

Wings academy is a tuition center situated in Sham Nagar, Dharamshala. The business is about providing
tuition services to school students of class 8th to class 12th. It currently focuses on the students from the
CBSE background. The tuition services which are provided in the center are very useful to the students.

OWNERS:

Mr. Ashish Sharma

Mr. Ashish works in a school as a physics teacher and lives in joint family of eight including his parents,
his wife, a brother, brother’s wife, a daughter and a nephew. Annual Income of Mr. Ashish is ₹ 9,00,000
from all his income resources. He has no partner in the business and he is handling his entire business all
by himself.

VISION ABOUT BUSINESS:

Providing children quality education and helping them choosing a better future.

FUTURE PLANS:

‘I wish to carry out the same business plan which I am carrying right now and also I want to expand my
business by providing training services to the pass out students of school regarding NDA, JEE MAINS and
ADVANCE both, AIIMS and NEET.’ - Ashish Sharma

BUSINESS/PROJECT PLAN
The project that we will be evaluating is regarding the same tuitions for the students of ICSE and state
board schools at the near by places. Mr. Ashish has shown his interest in this segment of students
because he feels there is enough scope for him to penetrate in this market. Not only this will increase
the scope of his business and but also it will also increase the sphere of his business to a greater extent.

We will be evaluating the same project plan in this regard.

FINANCIAL DETAILS
Expected Revenue:

₹ 3,60,000 per annum

Monthly demand = 10 students

Price = ₹ 3000 per student per month

Cost:

₹ 2,52,000 per annum

Monthly demand = 10 students

Unit cost = ₹ 2,100 per student per month

Tax Rate:

20% (assumed)

Cost of Capital:

10% (Assumed)

PROJECT EVALUATION
CASH FLOW OF THE PROJECT
1. Initial Phase
a) initial investment 300000          
               
b
) Depreciation Schedule            
  No. of years 5          
  Cost 300000          
  Salvage Value 20000          
  Depreciation Per Year 56000          
  year 2020 2021 2022 2023 2024 2025
  Depreciation 0 56000 56000 56000 56000 56000
               
c) Working Capital Schedule            
  year 2020 2021 2022 2023 2024 2025
  revenue/sale 0 360000 378000 396900 416745 437582.3
  Working Capital 36000 37800 39690 41674.5 43758.23 0
  Additional Working Capital 36000 1800 1890 1984.5 2083.725  

2. Operating Phase
  year 2020 2021 2022 2023 2024 2025
  revenue 0 360000 378000 396900 416745 437582.3
  cost 0 252000 264600 277830 291721.5 306307.6
  EBDIT 0 108000 113400 119070 125023.5 131274.7
  Depreciation 0 56000 56000 56000 56000 56000
  EBIT 0 52000 57400 63070 69023.5 75274.68
  Interest 0 0 0 0 0 0
  PBT 0 52000 57400 63070 69023.5 75274.68
  Tax (20%) 0 10400 11480 12614 13804.7 15054.94
   PAT 0 41600 45920 50456 55218.8 60219.74
  OCF = PAT + Depreciation 0 97600 101920 106456 111218.8 116219.7

3. Terminal Phase
a) Terminal Value            
  year 2020 2021 2022 2023 2024 2025
  salvage value           20000
  sale value           25000
  gain/loss           5000
               
b
) release in working capital           43758.23

operating cash flow of the project

  year 2020 2021 2022 2023 2024 2025
-
  Initial investment 300000 0 0 0 0 0
  working capital -36000 -1800 -1890 -1984.5 -2083.73 0
  cash from operating phase 0 97600 101920 106456 111218.8 116219.7
  terminal value 0 0 0 0 0 5000
  release of working capital 0 0 0 0 0 43758.23
-
  OCF 336000 95800 100030 104471.5 109135.1 164978

Payback Period

PAYBACK PERIOD
  YEAR 2020 2021 2022 2023 2024 2025
  OCF -336000 95800 100030 104471.5 109135.1 116219.7
  CUMMULATIVE OCF   95800 195830 300301.5 409436.6 525656.3
  RECOVERY PERIOD   -240200 -140170 -35698.5 73436.58 189656.3
               
  PAYBACK PERIOD 3.28256          

Net Present Value

NET PRESENT VALUE

  YEAR 2020 2021 2022 2023 2024 2025
  OCF -336000 95800 100030 104471.5 109135.1 116219.7
   PV @ 10%   87090.91 82669.42 78490.98 74540.72 72163.29
               
  PV OF CASH INFLOW 394955.3          
  PV OF CASH OUTFLOW -336000          
  NPV 58955.33          

INTERNAL RATE OF RETURN

INTERNAL RATE OF RETURN

  YEAR 2020 2021 2022 2023 2024 2025 TOTAL
  NPV @ 5% -336000 91238.1 90730.16 90246.41 89785.7 91061.18 117061.5
  NPV @ 20% -336000 79833.33 69465.28 60458.04 52630.73 46706.09 -26906.5
  IRR 17.20%            

CONCLUSION
With the above evaluation we conclude that the project is going to produce positive cash flows and the
initial investment will start paying for itself after 3.28 years. Also, the IRR is greater than Cost of Capital.
Therefore, the project should be selected.

The above plan should be undertaken by Mr. Ashish.