Financial Management Project: Detailed Analysis of a Startup Business

This financial management project analyzes a business startup venture in Toronto, Canada, over a seven-year period. The project focuses on evaluating the feasibility of Mr. Isaac's new business by assessing its cash flows using a discounted cash flow approach. Revenue streams include sales of goods in Canada and a collaboration with a travel agency. The project includes monthly and annual cash flow projections, sensitivity analysis, and a positive net present value (NPV) for the project. The analysis considers initial investments, working capital, and foreign exchange rates. The project recommends accepting the project, with an expected return of approximately 16.07% from the initial investment, and the document is contributed by a student to be published on the website Desklib, a platform which provides all the necessary AI based study tools for students.

Running head: FINANCIAL MANAGEMENT
Financial Management:
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL MANAGEMENT
Executive Summary
The aim of the assignment is to evaluate the business start-up project that Mr. Isaac will be
evaluating based on the various cash flows that the company expects to receive from the business
operations of the company. The new startup operations of the company would be initiated in
Toronto, Canada. The business operations would be for a sum of seven years of time period
whereby relevant cash flows that would be flowing to the company would be considered. In
order to well analyze the feasibility of the business operation a valuation model would be applied
that is discounted cash flow approach whereby relevant cash flows flowing to the company
would be well taken into consideration. The business operations of the new startup venture has
been drawn on a monthly basis and on an annual basis. The business operations of the company
would be primarily distributed into key parts, in the first part the company would be well
receiving its revenue from the sales of goods in the Canada itself. While the other half of the
business revenue would be coming from the Toronto Business Collaboration from Mr. Jane who
runs a travel agent business in the Toronto. The business collaboration would be for a sum of two
years and in order to better analyze the cash flows respectively flowing from this collaboration
we have created a monthly budgeted cash flow statement for the company. The net present value
for the project has been positive for the company for the overall seven year trend period that has
been analyzed. The project feasibility was found to be on a positive scale for Mr. Isaac new
project venture and it is well recommended that he should accept the project. It is important to
note that there were several assumptions and figures base which were planned out for the
company and if the same materializes then Mr. Isaac on a turn would be creating a wealth of
around CAD 118,713 from the business, that is around 16.07% of return from the initial
investment of CAD 456,700 that would be done by the company.

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Table of Contents
Business Project Analysis................................................................................................................2
Assumptions, Estimates and Sensitivity Analysis...........................................................................3
Key Assumptions and Estimates.................................................................................................3
Sensitivity Analysis.....................................................................................................................5
Cash Flow and Viability Analysis...................................................................................................7
Other Financial Details..................................................................................................................11
Finance/Capital Available.........................................................................................................11
Depreciation Expenses...............................................................................................................11
Profit and Loss Statement..........................................................................................................12
Sales Growth..............................................................................................................................13
Purchase Cost Analysis..............................................................................................................13
Critical Reflection..........................................................................................................................14
References......................................................................................................................................15

3FINANCIAL MANAGEMENT
Business Project Analysis
The business analysis of the new project has been analyzed based on the cash flows that
would be flowing from the project for a sum period of seven years. Mr. Isaac in particular would
be running down a line of business in which he would be considering buying chocolates from
AlpenChoc, which is located in Germany and would be allowing Mr. Isaac to well sell their
associated range of product for an upfront premium for a seven year of trend period. The
business operations of the company would be simple it would be by buying chocolates from
Germany at a discounted rate and then selling the same at the estimated selling price in order to
earn profits. The chocolates considered varies from the normal range and types of chocolates that
are offered in the market. Mr. Isaac would be buying Artistic Innovative Flavored Chocolates
which would be having a sound demand as the same would be introduced in the market for the
first time. Expenses in particular would be in the field of shipping cost from Germany to Canada,
Purchase Cost of Products, Wages and Salaries, Credit Card Expenses and Depreciation
Expenses will be some of the key expenses that the company would be incurring for the trend
period. In particular Mr. Isaac has also well managed to go through a business operation or
business agreement with Mr. Jade who has well agreed to enter into a two year business
agreement for buying a defined set of chocolates units for its travel customers. The cash flow
analysis has been done separately for both the operations that the company would be running and
that would be helping us better analyze the cash flows that is flowing from each of the operations
of the company (Levin and Hallgren 2017). Several assumptions has been made with respect to
the business operations and cash flows that were forecasted for the company and accordingly
detailed discounted cash flow model has been built. The initial sum of money with which the

4FINANCIAL MANAGEMENT
company well be initiating the project would be around CAD456700 and the same would be
primarily in the form of upfront premium, asset purchase, security deposit and investment into
working capital of the business (Su et al., 2018). In particular since the business operations of the
company would be involving two different economies and exchange of goods would also be
done in a different currency that is EURO/CAD the exchange rate for EURO/CAD has also been
taken into consideration in order to well incorporate the forex factor that the business would be
undergoing. Risk and Return are some of the crucial aspects of the business and in order to well
account that sensitivity analysis for the business has been specially carried.
Assumptions, Estimates and Sensitivity Analysis
Key Assumptions and Estimates
The project investment has been well prepared based on a set of assumptions and factors
that might be relevant for the cash flows for the company (Siziba and Hall 2019). The key
assumptions that was made for the project investment are as follows:
 Initial Investment: The initial investment for the project would be around
CAD456,700 and that would be primarily in the field of Upfront Premium which is
expected to be around 40% of the available capital that is CAD800,000 that comes to
around CAD320,000 for the company. Capital Expenditure that the company would be
doing will be primarily purchase of key assets for the company that is Refrigerator
Expense and Table Top Wrapping Machine. The total amount of capital expenditure
would be around CAD17700 for the company. Other investments like security fees, e-
commerce sites and working capital for the company would be jointly contributing for
the total initial investment available for the company (Nawaiseh et al., 2017).

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 Working Capital: The working capital that would be available with the company will
be around CAD100,000 and the key reason why the given number has been done in
order to well account for the various operational and business expenses that Mr. Isaac
would be requiring for a sum of seven years. The investment into the working capital is
estimated to be well recovered by the company after a sum of seven years and is well
accounted in the drawn cash flow budget for the company.
 Forex Exchange Rate: The business operations of the company would be in particular
involving two economy that is Germany and Canada whereby the forex exchange rate
that is EUR/CAD would be considered. The current exchange rate for the currency pair
of EUR/CAD is around 1.55 and the same would be well considered for exchanging
the goods from Germany to Canada.
 Market Research Cost: Mr. Isaac in particular would be conducting a market survey
that would be involving around CAD5000 has been treated as suck cost and would not
be well accounted in the cash flow budget that has been prepared for the company.
 Discount Rate Assumption: The discount rate that would be well considered by the
company is rounded to 10% and the same has been well considered based on the risk
return basis that an investor can well generate by investing into the stock market. The
return generated by the S&P/TSX Composite Index has been around 10.4% and the
same has been well accounted while projecting the financials of the business venture
(Rothery and Rothery 2016).
 Additional Income/Investment Income: The total amount of capital that is available
with the company is around CAD800,000 and the amount that would be well utilized

6FINANCIAL MANAGEMENT
in the financial course of business operation will be around CAD4567,000. The
remaining amount CAD343,300 will be well invested into a risk free account that
would be well helping the company earn an additional set of 3% on the amount
invested on a yearly basis and the same has been well accounted in the Profit and Loss
Statement that has been drawn for the new venture.
Sensitivity Analysis
The sensitivity analysis shows the changes that would be well observed in the company if
a key component or factor well changes for a given period of time and the impact that it would
be creating on the cash flows of the company (Marchioni and Magni 2018). The key factor
which has been well changed in order to well account for performing the sensitivity analysis has
been the discount rate. In the base case of analysis the discount rate that has been well considered
for the analysis purpose has been around 10%, however, the same can well increase in order to
account for the forex risk and the increasing business risk (Batra and Verma 2017). The new set
of discount rate which was considered in order to well account for the increasing risks and
volatile sales base can be in respect to using a discount rate of 15% for the company’s
operations. The changes that would be well observed after accounting for the higher discount
rate would be a reduced amount of return or the NPV that the project would be creating. After
accounting for the changes the cash flows on a net present value that would be created from the
investment is expected to be around CAD18,260 for the company (Etemadi, Koosha and Salari
2018).
In particular the key aim of the sensitivity analysis has been to show the effect how a
change in a key factor can well influence the overall business decisions that the company would
be undertaking. In the case analyzed even if the discount rates well changes from 10% to 15%

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then the overall value that would be created from the project is projected to be around
CAD18,260, which in the base case at a 10% discount level was calculated to be around CAD
118,713 for the company (Shaban, Al-Zubi and Abdallah 2017).

8FINANCIAL MANAGEMENT
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Investment Available CAD 800,000
Investible Sum CAD 800,000
Upfront Fees CAD 320,000
Special Refrigerator CAD 15,500
Security Fees CAD 10,500 CAD 10,500
E-Commerce Site CAD 8,500
Table Top Wrapping Machine CAD 2,200
Investment in Working Capital CAD 100,000
Initial Investment CAD 456,700
Canada Operations (Core Business)
Unit Sold 3257 9000 9000 9000 9000 9000 9000
Sales Price CAD 160 CAD 160 CAD 160 CAD 160 CAD 160 CAD 160 CAD 160
Total Sales CAD 521,110 CAD 1,440,000 CAD 1,440,000 CAD 1,440,000 CAD 1,440,000 CAD 1,440,000 CAD 1,440,000
Variable Cost (Total Purchase Cost) CAD 409,072 CAD 1,130,400 CAD 1,130,400 CAD 1,130,400 CAD 1,130,400 CAD 1,130,400 CAD 1,130,400
Shipping & Package Cost CAD 19,542 CAD 54,000 CAD 54,000 CAD 54,000 CAD 54,000 CAD 54,000 CAD 54,000
Rent (Fixed Cost) CAD 42,000 CAD 42,000 CAD 42,000 CAD 42,000 CAD 42,000 CAD 42,000 CAD 42,000
Credit Card Fees (1.2% of Sale) CAD 17,280 CAD 17,280 CAD 17,280 CAD 17,280 CAD 17,280 CAD 17,280
Wages and Salaries (Fixed Costs) CAD 30,000 CAD 30,000 CAD 30,000 CAD 30,000 CAD 30,000 CAD 30,000 CAD 30,000
Depreciation Exp. Of Refrigerator CAD 2,214 CAD 2,214 CAD 2,214 CAD 2,214 CAD 2,214 CAD 2,214 CAD 2,214
Total Expenses CAD 500,613 CAD 1,273,680 CAD 1,273,680 CAD 1,273,680 CAD 1,273,680 CAD 1,273,680 CAD 1,273,680
Cash Inflows/(Outflows) CAD 20,497 CAD 166,320 CAD 166,320 CAD 166,320 CAD 166,320 CAD 166,320 CAD 176,820
Torronto Operation (Other Oper.)
Unit Sold 1200 1200
Sales Price CAD 45 CAD 45
Total Sales CAD 54,000 CAD 54,000
Decorative Papers CAD 9,600 CAD 9,600
Assistant Salary CAD 6,000 CAD 6,000
Variable Expenses CAD 37,680 CAD 37,680
Depreciation of Wrapping Machine CAD 1,100 CAD 1,100
Total Expenses CAD 54,380 CAD 54,380 CAD 0 CAD 0 CAD 0 CAD 0 CAD 0
Net Cash Flows (CAD 380) (CAD 380) CAD 0 CAD 0 CAD 0 CAD 0 CAD 0
Total Cash Flows CAD 20,117 CAD 165,940 CAD 166,320 CAD 166,320 CAD 166,320 CAD 166,320 CAD 176,820
Tax Rate @ 25% CAD 5,029 CAD 41,485 CAD 41,580 CAD 41,580 CAD 41,580 CAD 41,580 CAD 44,205
After Tax Cash Flows (CAD 456,700) CAD 15,088 CAD 124,455 CAD 124,740 CAD 124,740 CAD 124,740 CAD 124,740 CAD 132,615
Add: Non Cash Exp. (Depreciation) CAD 3,314 CAD 3,314 CAD 2,214 CAD 2,214 CAD 2,214 CAD 2,214 CAD 2,214
Add: Working Capital Recovery CAD 100,000
Free Cash Flows (CAD 456,700) CAD 18,402 CAD 127,769 CAD 126,954 CAD 126,954 CAD 126,954 CAD 126,954 CAD 234,829
Dicounting Factor @ 10% 1.00 0.91 0.83 0.75 0.68 0.62 0.56 0.51
Discounted Cash Flow (DCF) (CAD 456,700) CAD 16,729 CAD 105,594 CAD 95,383 CAD 86,711 CAD 78,829 CAD 71,662 CAD 120,505
NPV
IRR
Investment Amount CAD 800,000
Finance Utilized (CAD 456,700)
Balance CAD 343,300
Interest Rate 3.00%
CAD 118,713
16.07%
Project Investment Analysis
Particulars Yearly Cash Flow Analysis

9FINANCIAL MANAGEMENT
Cash Flow and Viability Analysis
The cash flow analysis for the company has been projected for a sum of seven years
whereby relevant cash inflows in the form of sales and cash outflows in the form of operational
and business related expenses has been well accounted. It is important to note that the cash flow
analysis has been segregated into two key portions. The first portion of the cash flow statement
consist of the revenue and expenses that are directly to the business operation that Mr. Isaac
would be undergoing. In the second portion of the cash flow statement of the company, the
business agreement that has been well drawn with the Travel Agency Company has been
considered. On an overall basis, the net cash flows that would be flowing to the company from
the entire business operations has been calculated. The effect of taxation has also been shown
with the help of statutory tax rate of 25% that has been well applied to the cash flows of the
company.
Project Investment Analysis
Particulars Yearly Cash Flow Analysis
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Investment Available
CAD
800,000
Investible Sum
CAD
800,000
Upfront Fees
CAD
320,000
Special Refrigerator CAD 15,500
Security Fees CAD 10,500 CAD 10,500
E-Commerce Site CAD 8,500
Table Top Wrapping Machine CAD 2,200
Investment in Working Capital
CAD
100,000
Initial Investment
CAD
456,700
Canada Operations (Core
Business)

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Unit Sold 3257 9000 9000 9000 9000 9000 9000
Sales Price CAD 160 CAD 160 CAD 160 CAD 160 CAD 160 CAD 160 CAD 160
Total Sales
CAD
521,110
CAD
1,440,000
CAD
1,440,000
CAD
1,440,000
CAD
1,440,000
CAD
1,440,000
CAD
1,440,000
Variable Cost (Total Purchase
Cost)
CAD
409,072
CAD
1,130,400
CAD
1,130,400
CAD
1,130,400
CAD
1,130,400
CAD
1,130,400
CAD
1,130,400
Shipping & Package Cost
CAD
19,542 CAD 54,000 CAD 54,000 CAD 54,000 CAD 54,000 CAD 54,000 CAD 54,000
Rent (Fixed Cost)
CAD
42,000 CAD 42,000 CAD 42,000 CAD 42,000 CAD 42,000 CAD 42,000 CAD 42,000
Credit Card Fees (1.2% of Sale) CAD 17,280 CAD 17,280 CAD 17,280 CAD 17,280 CAD 17,280 CAD 17,280
Wages and Salaries (Fixed Costs)
CAD
30,000 CAD 30,000 CAD 30,000 CAD 30,000 CAD 30,000 CAD 30,000 CAD 30,000
Depreciation Exp. Of Refrigerator CAD 2,214 CAD 2,214 CAD 2,214 CAD 2,214 CAD 2,214 CAD 2,214 CAD 2,214
Total Expenses
CAD
500,613
CAD
1,273,680
CAD
1,273,680
CAD
1,273,680
CAD
1,273,680
CAD
1,273,680
CAD
1,273,680
Cash Inflows/(Outflows)
CAD
20,497
CAD
166,320
CAD
166,320
CAD
166,320
CAD
166,320
CAD
166,320
CAD
176,820
Torronto Operation (Other Oper.)
Unit Sold 1200 1200
Sales Price CAD 45 CAD 45
Total Sales
CAD
54,000 CAD 54,000
Decorative Papers CAD 9,600 CAD 9,600
Assistant Salary CAD 6,000 CAD 6,000
Variable Expenses
CAD
37,680 CAD 37,680
Depreciation of Wrapping
Machine CAD 1,100 CAD 1,100
Total Expenses
CAD
54,380 CAD 54,380 CAD 0 CAD 0 CAD 0 CAD 0 CAD 0
Net Cash Flows (CAD 380) (CAD 380) CAD 0 CAD 0 CAD 0 CAD 0 CAD 0
Total Cash Flows
CAD
20,117 CAD 165,940 CAD 166,320 CAD 166,320 CAD 166,320 CAD 166,320 CAD 176,820
Tax Rate @ 25% CAD 5,029 CAD 41,485 CAD 41,580 CAD 41,580 CAD 41,580 CAD 41,580 CAD 44,205
After Tax Cash Flows
(CAD
456,700)
CAD
15,088
CAD
124,455
CAD
124,740
CAD
124,740
CAD
124,740
CAD
124,740
CAD
132,615
Add: Non Cash Exp. (Depreciation) CAD 3,314 CAD 3,314 CAD 2,214 CAD 2,214 CAD 2,214 CAD 2,214 CAD 2,214
Add: Working Capital Recovery CAD 100,000
Free Cash Flows
(CAD
456,700)
CAD
18,402
CAD
127,769
CAD
126,954
CAD
126,954
CAD
126,954
CAD
126,954
CAD
234,829
Dicounting Factor @ 10% 1.00 0.91 0.83 0.75 0.68 0.62 0.56 0.51
Discounted Cash Flow (DCF)
(CAD
456,700)
CAD
16,729
CAD
105,594 CAD 95,383 CAD 86,711 CAD 78,829 CAD 71,662
CAD
120,505

11FINANCIAL MANAGEMENT
NPV CAD 118,713
IRR 16.07%

12FINANCIAL MANAGEMENT
0 1 2 3 4 5 6 7 8 9 10 11 12
Investment Available CAD 800,000
Investible Sum CAD 800,000
Upfront Fees CAD 320,000
Special Refrigerator CAD 15,500
Security Fees CAD 10,500
E-Commerce Site CAD 8,500
Table Top Wrapping Machine CAD 2,200
Working Capital CAD 100,000
Initial Investment CAD 456,700
Canada Operations (Core Business)
Unit Sold 50 64 82 105 134 171 219 280 358 458 586 750
Sales Price CAD 160 CAD 160 CAD 160 CAD 160 CAD 160 CAD 160 CAD 160 CAD 160 CAD 160 CAD 160 CAD 160 CAD 160
Total Sales CAD 8,000 CAD 10,233 CAD 13,089 CAD 16,742 CAD 21,415 CAD 27,391 CAD 35,036 CAD 44,815 CAD 57,323 CAD 73,321 CAD 93,785 CAD 119,961
Variable Cost (Total Purchase Cost) CAD 6,280 CAD 8,033 CAD 10,275 CAD 13,142 CAD 16,810 CAD 21,502 CAD 27,503 CAD 35,180 CAD 44,998 CAD 57,557 CAD 73,621 CAD 94,169
Shipping & Package Cost CAD 300 CAD 384 CAD 491 CAD 628 CAD 803 CAD 1,027 CAD 1,314 CAD 1,681 CAD 2,150 CAD 2,750 CAD 3,517 CAD 4,499
Rent CAD 3,500 CAD 3,500 CAD 3,500 CAD 3,500 CAD 3,500 CAD 3,500 CAD 3,500 CAD 3,500 CAD 3,500 CAD 3,500 CAD 3,500 CAD 3,500
Credit Card Fees (1.2% of Sale) CAD 96 CAD 123 CAD 157 CAD 201 CAD 257 CAD 329 CAD 420 CAD 538 CAD 688 CAD 880 CAD 1,125 CAD 1,440
Wages and Salaries CAD 2,500 CAD 2,500 CAD 2,500 CAD 2,500 CAD 2,500 CAD 2,500 CAD 2,500 CAD 2,500 CAD 2,500 CAD 2,500 CAD 2,500 CAD 2,500
Depreciation of Refrigerator CAD 185 CAD 185 CAD 185 CAD 185 CAD 185 CAD 185 CAD 185 CAD 185 CAD 185 CAD 185 CAD 185 CAD 185
Total Expenses CAD 12,861 CAD 14,724 CAD 17,107 CAD 20,156 CAD 24,055 CAD 29,043 CAD 35,422 CAD 43,582 CAD 54,020 CAD 67,371 CAD 84,448 CAD 106,292
Cash Inflows/(Outflows) -CAD 4,861 -CAD 4,491 -CAD 4,018 -CAD 3,414 -CAD 2,640 -CAD 1,651 -CAD 386 CAD 1,232 CAD 3,302 CAD 5,950 CAD 9,337 CAD 13,669
Torronto Operation (Other Oper.)
Unit Sold 100 100 100 100 100 100 100 100 100 100 100 100
Sales Price CAD 45 CAD 45 CAD 45 CAD 45 CAD 45 CAD 45 CAD 45 CAD 45 CAD 45 CAD 45 CAD 45 CAD 45
Total Sales CAD 4,500 CAD 4,500 CAD 4,500 CAD 4,500 CAD 4,500 CAD 4,500 CAD 4,500 CAD 4,500 CAD 4,500 CAD 4,500 CAD 4,500 CAD 4,500
Decorative Papers CAD 800 CAD 800 CAD 800 CAD 800 CAD 800 CAD 800 CAD 800 CAD 800 CAD 800 CAD 800 CAD 800 CAD 800
Assistant Salary CAD 500 CAD 500 CAD 500 CAD 500 CAD 500 CAD 500 CAD 500 CAD 500 CAD 500 CAD 500 CAD 500 CAD 500
Variable Expenses CAD 3,140 CAD 3,140 CAD 3,140 CAD 3,140 CAD 3,140 CAD 3,140 CAD 3,140 CAD 3,140 CAD 3,140 CAD 3,140 CAD 3,140 CAD 3,140
Depreciation of Wrapping Machine CAD 26 CAD 26 CAD 26 CAD 26 CAD 26 CAD 26 CAD 26 CAD 26 CAD 26 CAD 26 CAD 26 CAD 26
Total Expenses CAD 4,466 CAD 4,466 CAD 4,466 CAD 4,466 CAD 4,466 CAD 4,466 CAD 4,466 CAD 4,466 CAD 4,466 CAD 4,466 CAD 4,466 CAD 4,466
Net Cash Flows CAD 34 CAD 34 CAD 34 CAD 34 CAD 34 CAD 34 CAD 34 CAD 34 CAD 34 CAD 34 CAD 34 CAD 34
Total Cash Flows (CAD 4,827) (CAD 4,457) (CAD 3,985) (CAD 3,380) (CAD 2,607) (CAD 1,617) (CAD 352) CAD 1,266 CAD 3,336 CAD 5,984 CAD 9,371 CAD 13,703
Tax Rate @ 25% (CAD 1,207) (CAD 1,114) (CAD 996) (CAD 845) (CAD 652) (CAD 404) (CAD 88) CAD 317 CAD 834 CAD 1,496 CAD 2,343 CAD 3,426
After Tax Cash Flows (CAD 456,700) (CAD 3,620) (CAD 3,343) (CAD 2,988) (CAD 2,535) (CAD 1,955) (CAD 1,213) (CAD 264) CAD 950 CAD 2,502 CAD 4,488 CAD 7,028 CAD 10,277
Add: Depreciation CAD 211 CAD 211 CAD 211 CAD 211 CAD 211 CAD 211 CAD 211 CAD 211 CAD 211 CAD 211 CAD 211 CAD 211
Free Cash Flows (CAD 3,409) (CAD 3,132) (CAD 2,778) (CAD 2,324) (CAD 1,744) (CAD 1,002) (CAD 53) CAD 1,160 CAD 2,713 CAD 4,699 CAD 7,239 CAD 10,488
Dicounting Factor @ 10% 1.00 0.99 0.98 0.98 0.97 0.96 0.95 0.94 0.94 0.93 0.92 0.91 0.91
Discounted Cash Flow (DCF) -CAD 456,700 -CAD 3,381 -CAD 3,081 -CAD 2,710 -CAD 2,249 -CAD 1,674 -CAD 954 -CAD 50 CAD 1,086 CAD 2,518 CAD 4,326 CAD 6,610 CAD 9,497
Total Cash Flows CAD 9,939
Project Investment Analysis
Monthly Cash Flow Statement (First Year)
Particulars

13FINANCIAL MANAGEMENT
It is important to note that the fixed cost associated with the business operations in
particular would be creating a pressure on the company because of low level of sales and cash
inflows from the company. After well accounting for the discount rate of 10% the estimated level
of net present value of cash flows for the first year was calculated to be around CAD9,939.
Other Financial Details
Finance/Capital Available
The amount of capital that is available for the business would be primarily around
CAD800,000, whereby it is well estimated that around CAD456,700 would be well invested in
the business operations and the remaining amount for the company would be invested in the risk
free rate of 3.00% which would be well helping Mr. Isaac generate a steady amount of cash
flows (Bagella 2018). It is a good strategy that has been planned out for Mr. Isaac as he is
currently into the retirement stage and the amount received that is around CAD800,000 is the
only lump-sum amount that is remaining with the company (Banks 2016).
Depreciation Expenses
The depreciation expenses for the company would be charged for the refrigerator and
wrapping machine which will be purchased by the company. The depreciation expenses for the
company would be charged on a straight line basis for the company. The life period of
refrigerator has been considered for a time period of seven years in which the company would be
depreciating the value of asset till zero as no salvage value will be generated from the same. On
the other hand, the depreciation for the wrapping machine will be charged for a period of two

14FINANCIAL MANAGEMENT
years which is the time period of investment or business agreement with the Travel Agency
Company.
Profit and Loss Statement
The profit and loss statement for the company has been well prepared for a sum of one
year in which relevant cash flows has been accounted. The key group of revenue would be in the
field of revenue coming from Canadian Core Business, Other Income would be coming from the
business collaboration with the Travel Agency Company (Calotă et al., 2020). While Investment
income would be in the form of additional capital investment that has been invested at a rate of
3.00%. Expenses in particular related to Cost of Goods purchased, salary & wages, monthly rent,
credit card charges and depreciation expenses for the company. The net profit after accounting
for taxes has been around CAD13,301 for the business venture (Lourenço et al., 2018).
Profit and Loss Account (1st Year)
Particulars Amount ($)
Revenue Receipts CAD 521,110
Other Income CAD 54,000
Income from Investment CAD 10,299
Total Revenue CAD 585,409
Less: Cost of Goods Sold CAD 446,752
Packaging and Shipping Charge CAD 19,542
Monthly Rent CAD 42,000
Credit Card Remittance Fees CAD 6,253
Salary and Wages CAD 30,000
Market Research Cost CAD 5,000
Boxes and Decorative Paper CAD 9,600
Assistant Salary CAD 6,000
Depreciation Expenses CAD 2,529
Total Costs CAD 567,675
Profit Before Tax CAD 17,734
Tax@25% CAD 4,434
Net Profit CAD 13,301

15FINANCIAL MANAGEMENT
Sales Growth
The growth rate that have been considered with the sales of the company has been well
done on an equal growth basis, whereby it was well given that the sales of the company is
expected to well increase from 50 units to around 750 units. Now in order to well account for a
systematic and compounded growth rate of the units that have been given to us, we have
considered a given set of growth rate. The growth considered in this aspect has been around
27.91% and the same will be well used in the first year of business operations (Coad Segarra and
Teruel 2016).
Purchase Cost Analysis
The purchase cost for the chocolates has been well designed and calculated by taking the
price of chocolates prevailing in the Euro Zone, which is around EUR120 per/kg and the same
would be well converted into Canadian Dollar by using the exchange rate of EUR/CAD of 1.55.
The price of chocolates in CAD Currency would be around CAD186 and the amount of discount
that would be applied for calculating the cost would be around 40%, which hence forth would
give us the purchase price of about CAD 111.6. It is important to note that we have well
incorporated the packaging and shipping charges that Mr. Isaac have to well bear for transferring
the required goods from Germany to Canada which would be in the form of packaging cost. It is
important to note that the purchase cost for the company can well change if the currency rate
changes and it is recommended that Mr. Isaac well uses a range of financial derivatives in order
to well hedge the changes or volatility that is associated with the currency pair. The key benefit

16FINANCIAL MANAGEMENT
that he would be getting from the same is the risk management and reduction in the overall
volatility in the profitability level of the business venture. The key highlight of the overall
purchase cost of the company is shown below:
Worksheet Analysis
Particulars Amt. in Kg
Chocolate MRP (In Euro) 120
Exchange Rate (Euro/CAD) 1.55
Chocolate MRP (In CAD) 186
Discount % 40%
Gross Purchase Price 111.6
Add: Shipping Cost 14
Net Purchase Price (In CAD) 125.6
Sunk Cost 5000
(Market Study and Research)
Critical Reflection
The investment/business project that has been well evaluated for Mr. Isaac has been well
done for a sum of seven year venture project that he is well willing to undertake. The sales
analysis has been well done with the help of various cash flow changes that the company would
be well experiencing in the given time frame of seven years. Changes in the cash flow to
variability in the expenses for the company has been well accounted with the help of the cash
flow statement that has been drawn out for the company. In particular there was various
estimates, which was well highlighted had in particular helped us in completing the cash flow
projection. Application of taxation rate and the benefits one can get by reporting non-cash
expenses actually helped in reducing the overall taxation rate which whereby reduced the

17FINANCIAL MANAGEMENT
effective tax rate. The application of NPV and IRR in particular also helped in better assessment
of the project. Risk management application has also been done by us with the help of sensitivity
analysis whereby relevant changes in the cash flows had been considered after changing a key
variable for the project.

18FINANCIAL MANAGEMENT
References
Bagella, M. ed., 2018. Finance, investment and innovation: theory and empirical evidence (Vol.
4). Routledge.
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