SMEDA Day Care Center

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Pre-Feasibility Study Day Care Center

Small and Medium Enterprise Development Authority
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE 6th Floor, LDA Plaza, Egerton Road, Lahore. Tel: (042) 111-111-456, Fax: (042) , 6304926, 6304927 [email protected]
REGIONAL OFFICE PUNJAB 8th Floor, LDA Plaza, Egerton Road, Lahore. Tel: (042) 111-111-456 Fax: (042) 6304926, 6304927 [email protected] REGIONAL OFFICE SINDH 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 [email protected] REGIONAL OFFICE NWFP Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 [email protected] REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 2831623, 2831702 Fax: (081) 2831922 [email protected]

June, 2007

Pre-feasibility Study

Day Care Center

DISCLAIMER The purpose and scope of this information memorandum is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. Therefore, the content of this memorandum should not be relied upon for making any decision, investment or otherwise. The prospective user of this memorandum is encouraged to carry out his/her own due diligence and gather any information he/she considers necessary for making an informed decision. The content of the information memorandum does not bind SMEDA in any legal or other form.

DOCUMENT CONTROL
Document No. Revision Prepared by Issued by Issue Date Revision Date PREF-03 2 SMEDA-Balochistan Library Officer April, 2004 June, 2007

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Table of Contents
1 2 Purpose of the document .....................................................................................................5 Project Profile .....................................................................................................................5 2.1 Project Brief ................................................................................................................5 2.2 Opportunity Rationale..................................................................................................5 2.3 Market Entry Timing ...................................................................................................5 2.4 Proposed Business Legal Status ...................................................................................6 2.5 Project Capacity and Rationale ....................................................................................6 2.6 Project Investment .......................................................................................................6 2.7 Proposed Product Mix .................................................................................................6 2.8 Recommended Project Parameters ...............................................................................8 2.9 Proposed Location .......................................................................................................8 2.10 Key Success Factors/Practical Tips for Success ...........................................................8 2.11 Regulations..................................................................................................................9 2.12 Strategic Recommendations.........................................................................................9 3 Current Industry Structure ...................................................................................................9 3.1 Current Scenario in Quetta City .................................................................................10 4 Market Information ...........................................................................................................10 4.1 Target Customers.......................................................................................................10 4.2 Market Potential ........................................................................................................10 5 Project Requirements.........................................................................................................11 5.1 Day Care Center Requirement ...................................................................................11 5.2 Equipment Details .....................................................................................................11 5.3 Furniture and Equipment Maintenance.......................................................................12 6 Human Resource Requirement ..........................................................................................12 7 Building Requirement .......................................................................................................13 7.1 Covered Area Requirement........................................................................................13 7.2 Recommended Mode .................................................................................................13 7.3 Suitable Location.......................................................................................................13 7.4 Utilities and Infrastructure Requirement ....................................................................13 8 Project Economics.............................................................................................................14 8.1 Project Cost ...............................................................................................................14 8.2 Project Returns ..........................................................................................................14 8.3 Project Financing.......................................................................................................14 9 Financial Analysis .............................................................................................................15 9.1 Project Cost ...............................................................................................................15 9.2 Projected Income Statement.......................................................................................16 9.3 Projected Balance Sheet.............................................................................................17 9.4 Projected Cash Flow Statement..................................................................................18 10 Key Assumptions ..........................................................................................................19 10.1 Capacity Utilization Assumptions ..............................................................................19 10.2 Economic Assumptions .............................................................................................19 10.3 Expense Assumptions ................................................................................................19 10.4 Depreciation Expense Assumptions ...........................................................................19
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10.5 10.6 10.7 10.8 10.9

Cost of Goods Sold....................................................................................................20 Student Capacity Assumptions...................................................................................20 Revenue Assumptions................................................................................................20 Cash flow Assumptions .............................................................................................20 Financing Assumptions..............................................................................................20

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Introduction to SMEDA
The Small and Medium Enterprise Development Authority (SMEDA) was established with the objective to provide fresh impetus to the economy through the launch of an aggressive SME support program.1 Since its inception in October 1998, SMEDA had adopted a sectoral SME development approach. A few priority sectors were selected on the criterion of SME presence. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved recommending changes in the regulatory environment by taking into consideration other important aspects including financial aspects, niche marketing, technology upgradation and human resource development. SMEDA has so far successfully formulated strategies for sectors including, fruits and vegetables, marble and granite, gems and jewelry, marine fisheries, leather and footwear, textiles, surgical instruments, urban transport and dairy. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in terms of SMEDA’s areas of operation. Along with the sectoral focus a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of viable business opportunities for potential SME investors. In order to facilitate these investors, SMEDA provides business guidance through its help desk services as well as development of project specific documents. These documents consist of information required to make well-researched investment decisions. Pre-feasibility studies and business plan development are some of the services provided to enhance the capacity of individual SMEs to exploit viable business opportunities in a better way. This document is in the continuation of this effort to enable potential investors to make wellinformed investment decisions.

1

For more information on services offered by SMEDA, please visit our website: www.smeda.org.pk

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1

PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, and production, finance and business management.

2

PROJECT PROFILE

The project is about starting a Day Care Center for infants and children of age up to 5. The proposed plan is to offer programs ranging from Infant Care for infants of more than 6 months of age to Kindergarten for children of age up to 5 years. 2. 1 Project Brief

The study provides information regarding investment opportunity for setting up a Day Care Center in Quetta city. However, such a project could also be feasible for other metropolitan cities of Pakistan i.e. Lahore, Islamabad, Peshawar, Karachi and smaller cities but initial market research/survey would be required to identify its need. 2. 2 Opportunity Rationale

Day Care Center is the place where learning and fun become one and the primary place where young children learn social and pre-academic skills necessary for success in school. The Day Care’s infant program is centered on the natural curiosity and energy of very young children. Childcare programs and pre-school curriculums integrate a wealth of intriguing and engaging learning activities that stimulate brain development in children. The fast paced life of the cities is significantly influencing the life style of its inhabitants. Economic pressures are compelling both parents to work towards achieving and sustaining quality life standards. This has further added to complexity and competition of any Metropolitan city. As a result of these social changes, the trend of sending children to Day Care Centers at a much earlier age is gaining rapid grounds. The workingwomen will prefer a day care center to a nanny at home because a day care center can provide proper grooming and prepare the youngsters for admission at school in coming years. Also, the whole institution is responsible for the child rather than a single nanny. Parents are very much worried as there are no institutes, which can help children blossom intellectually and emotionally, while having a lot of purposeful fun along the way. 2. 3 Market Entry Timing

In Quetta, the admissions in all the educational institutions start right after the summer vacations. Therefore it is recommended that the admissions/registrations of the Day Care center should be started at least one week prior to the start of regular schools/colleges to make the process easy both for parents and center’s registration staff. This will also ensure that students complete this program at appropriate timing for getting further admission in regular schools.
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2. 4

Proposed Business Legal Status

It is recommended that this project should be started as sole proprietorship or partnership as this does not involve heavy investment. Moreover, less complications and costs are involved in forming, administering and running the sole proprietorship or partnership business. The tax rates applicable for sole proprietorship are lower than private or public limited. 2. 5 Project Capacity and Rationale

It is proposed that infants of more than 6 months of age to children of 5 years of age be admitted in the center. There are five (5) proposed classrooms for the Day Care Center. Two class rooms would be for Infant Care program, one for two year olds, one for Play Group for children of age between 3-4 years, and one for Kindergarten for children of age 4-5 years old. Each class room would have capacity of 22 students. The project would have total capacity of 110 students. However, this capacity may not be achieved in the initial years of operations. Table 3.5 Year Wise Number of Students Year 1 15 8 8 8 39 Project Investment Year 2 21 12 11 11 55 Year 3 27 15 15 15 72 Year 4 35 19 17 17 88 Year 5 43 22 20 20 105

Programs Offered Infant Care Program Two Year Olds Play Group (3-4 years old) Kindergarten (4-5 years old) Total 2. 6

The total investment required for this project is 1.2 m. The investment mainly covers capital costs of 0.8 m and working capital requirement of 0.4 m. 2. 7 Proposed Product Mix

The Day Care Center will offer different programs for different age groups. The details are described as follows: 2.7.1 Infant Care Program The infant care program is centered on the natural curiosity and energy of very young children. It will provide infants with lots of attention, a variety of appropriate activities, and abundant conversation and nurturing to make the world for a baby fun, interesting, safe, and loving. Children will be with his/her caregiver (nanny) in one of the center’s special nook areas where he/she will experience an array of experiences especially designed to meet an infant's needs.

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 Sleeping Nook

This would be the area of the classroom where infants sleep during the day. As infants are all on different schedules, this nook is used throughout the day for sleeping infants.
 Feeding Nook

The Feeding Nook would be used for baby feeding.
 Movement Nook

Infants would be able to practice their motor skills such as rolling over, sitting up, crawling, puling up, climbing and walking in the Movement Nook.
 Curiosity Nook

Infants would be given opportunities for multi-sensory plays where Infants would begin to explore different materials and begin to understand them.
 Diapering Nook

The Diapering Nook will be used for diaper changing. Extra clothing and materials would also be stored. It would also offer opportunities to interact individually with babies.
 Outdoor Play Nook

When weather conditions would be appropriate, this open air play nook would provide a safe and interesting place for babies.
 Comfort Nook

The Comfort Nook would be soft and cozy place that would provide a sense of security and a place to rest before babies move on to a more active nook. 2.7.2 For two-year-olds: The curriculum for two-year-olds will provide an enriching environment with activities that are designed to enhance child's total development in a quality early childhood education environment. The daycare curriculum will allow two-year-old children to spend busy and funfilled days engaged in activities that would promote learning. Teachers assigned for the two-year-old student group will be trained to incorporate appropriate literature, educational materials, music, and other specially selected materials and resources, all with the goal of enhancing the rapid changes that occur in a child's brain development in the earliest stages of life. 2.7.3 Play Group (3 and young 4-years-old) Studies have found that learning improves when children are engaged in enjoyable and meaningful activities. That is why every curriculum will include a variety of intriguing activities that can stimulate early brain development with a focus on creative plays. This will be a better place where learning with activities will be focused.

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2.7.4 Kindergarten (4 and young 5-year-olds) Kindergarten Program will be filled with fun and educational activities that will be carefully designed to help bring out a child's natural curiosity and encourage a lifelong joy of learning. The curriculum will use themed learning units that incorporate reading, writing, math, science, social studies and more. 2. 8 Recommended Project Parameters Human Resource 18 IRR 27% Location Areas within Quetta city. Cost of Capital 16%

Capacity 110 students Project Cost 1.2 million 2. 9

Financial Summary NPV Payback Period 1,213,942 4.82

Proposed Location

It is recommended that the proposed project be installed in such area of Quetta city so that it could become easily accessible for parents. 2. 10     Key Success Factors/Practical Tips for Success

The location plays an important role so that the facility/center should easily be accessible by parents. The center should target mainly workingwomen and business community because they are the ones who are potential customers for such a facility. The teacher student ratio should be kept at a well-researched optimum level as indicated in this report. Parents are always conscious about the well being and safety of their children at schools, therefore, it is suggested that the center’s environment should ensure security and should be free from any apparent hazard. The center should preferably not be located in a highly populated location or at a location with high traffic hazards. Continuous teacher parent interactions should also be a regular feature of the center’s day care and education system. It is suggested that visual and other teaching tools should be used. The center should be started at least one week prior to the ending of winter vacations so that proper promotion and management of admissions are conducted. A well-trained/experienced head/principal of the center would teach the new staff and well manage the daily affairs of center.

   

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The role of the owner should be in line with the mission of the day care center to provide guidelines and facilities to children at the grass root level and spread standardized and costeffective education far across the country. 2. 11 Regulations

No formal registration is required for the Montessori and elementary schools with the Education Directorate Schools2. However, if any expansion is planned, the schools are required to get registered with Provincial Education Department in the office of Education Directorate Schools. The application is to be submitted on a prescribed form which can be obtained from the department. 2. 12 Strategic Recommendations

It is recommended that the proposed project should be established in a rented building to reduce the project cost.

3

CURRENT INDUSTRY STRUCTURE
 Change in Life Style

Some of the evolving trends of Quetta city residents are associated with life that is becoming busy, and hectic. People find it difficult to provide better training/attention to their children at home as they have to go to offices/work. As most of the people have started living separately (opposed to the joint-family system) therefore, many of them face financial problems and women have started working in order to support their families. A facility that could provide day care during office/working hours would make their hectic lives easy.
 Avoidance of Responsibilities

Today’s parents could not find enough time to give proper attention to their children because of their daily busy and hectic office/working routines. Most of the high income family women are involved in other social and extra curricular activities such as clubs and gymnasiums therefore, find it very difficult to take out time for their children. A day care facility would give ease of mind to such parents.
 Day Care Center Provide Better Training

Today many people are of the view that day care centers and pre-schools can provide children better training and education because they have trained and educated staff, better training equipment, and toys. This is why they have decided to start early schooling for their children.

2

Education Directorate Schools

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3. 1

Current Scenario in Quetta City

Currently there are no private Day Care Centers in Quetta. The provisional government has established two Day Care Centers in Quetta to facilitate working women. One center is located at Patel Raod Quetta the other center is located at Wahdat Colony Brewery Road Quetta.. SBK Women University also has established a day care center to facilitate its staff. Children of age 3 months to 4 years are admitted in these centers which clearly indicates the demand for such a project proposed for Infants of more than 6 months of age to children of age up to 5 years. There are 267 primary schools for boys while 147 primary schools for girls at Quetta3 with a total enrollment of 29,023 boys and 17,433 girls respectively. The above mentioned figures clearly indicate the requirement of day care center in the private sector. Following are the suitable locations for the proposed institution:  Main City  Quetta Cantt  Near B.M.C Complex, Brewery Road

4

MARKET INFORMATION
4. 1 Target Customers

The Day Care Center has targeted the workingwomen and the business community having infants of age more than 6 months to children of age up to 5 years. The target population of the working women consists of the women with pre-school going children, and the women with children older than the pre-school age. The business community also has positive response since they too are very much involved in their daily routines and therefore can be targeted as potential customers. 4. 2 Market Potential

The normal school going age of children is around 3 years. Many parents having children of age between 3-5 years in Quetta city have not admitted their children in pre-schools. One reason is as they think it is too early to send them to schools and is also wastage of time and money. The daycare aims to provide such an environment in which new ways of learning would be introduced. Children are more likely to retain information learned when they are engaged in enjoyable and meaningful activities. The childcare programs and pre-school curriculums integrate a wealth of intriguing and engaging learning activities that stimulate brain development in children at pre-school stages.

3

Development Statistics of Balochistan 2006

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5

PROJECT REQUIREMENTS
5. 1 Day Care Center Requirement

The basic requirements for a daycare center includes Staff, Educational Tools for children, Class Rooms, Teachers’ Room, Library/Entertainment Room, Principal & Administration Room, Washrooms & Kitchen, Grounds, furniture, seesaw and other such items for physical activities, soft board and white boards etc. These materials are readily available in the local market. 5. 2 Equipment Details

The details of the different equipment required for the project are given as below: 5.2.1 Educational Tool The proposed educational tool for the center includes TV set, VCR, movies and other Montessori equipments (toys, puzzles, colored blocks and colored cylinders, books etc). All these equipments are easily available in the local market. Table 5.2-1 Description Equipment (Educational Tools) Machinery Requirement Details (educational tools) Total Amount (Rs.) 250,000

Table 5.2-2

Other Equipment Details Qty 1 1 1 2 10 1 10 Cost/Unit 2,800 2,500 5,000 2,400 700 11,000 600 Total Cost 2,800 2,500 5,000 4,800 7,000 11,000 6,000 5,000 44,100

Other Equipment Details Seesaw (9 feet) Slide 4 Feet Monkey Bar (6x6) Monkey Bar (4x4) White Boards Refrigerator Soft boards Misc. Kitchen Utensils Total Equipment Cost

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Table 5.2-3 Description

Furniture & Fixture Details Qty 6 20 6 20 2 40 40 10 3,500/ Sq.Ft 2 6 Cost/Unit 2,500 350 2,000 350 550 750 750 6,500 30 /Sq.Ft 40,000 21,000 1,500 Total Cost 15,000 7,000 12,000 7,000 1,100 30,000 30,000 65,000 105,000 40,000 42,000 9,000 363,100

Round Tables for Play Group Chairs for Play Group Round Tables for KG Chairs for KG Teacher Chairs for KG Student Chair & Table for Younger Pre-schoolers Student Chair & Table for Older Pre-schoolers Cupboards & Book shelves Carpet Furniture for Principal & Admin Staff Air Conditions Heaters Total Furniture & Fixtures 5. 3

Furniture and Equipment Maintenance

The furniture and equipment maintenance process will be conducted on yearly basis during the seasonal vacations.

6

HUMAN RESOURCE REQUIREMENT

The manpower required for operating the Day Care Center is as follows: Table 6-1 Human Resource Requirement Details Description Principal Accounts Officer Teachers Nannies Guard Helper/Peon Total Cost Qty 1 1 6 3 1 1 Salary 18,000 8,500 8,500 4,500 4,500 4,500 Total Monthly Salary 18,000 8,500 51,000 13,500 4,500 4,500 100,000

It is highly recommended that the nannies should be qualified females of age range from 18 to 30 to ensure the parents about their child’s proper care and safety. The nannies should be at least
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matriculates and should go from a proper child care training program before having the job responsibilities.

7

BUILDING REQUIREMENT
7. 1 Covered Area Requirement

The covered area details for the proposed project are given in the table below: Table 7-1 Description Class Rooms Teachers’ Room Library/Entertainment Room Principal & Administration Room Washrooms & Kitchen Grounds Total Building Area Table 8-2 Rent Cost Monthly Rent (Rs.) Building rent cost 7. 2 Recommended Mode 35,000 Annual Rent (Rs.) 420,000 Covered Area Requirement Details Sq .ft Required 2,000 144 500 244 180 5,532 8,600

It is recommended that the proposed project should be established in a rented building to reduce project cost. In case a purpose built building is purchased, project cost will increase. 7. 3 Suitable Location

After careful market survey/research of Quetta city, the suitable location for the project could be in main city, Quetta Cantt, or near BMC Complex Saryab Road. However such a project can also be feasible for other metropolitan cities of the country like Lahore, Karachi, Islamabad and other smaller cities but initial market survey and research is required to find out its need. 7. 4 Utilities and Infrastructure Requirement

Basic utilities like electricity, gas and water are required for operating the daycare center.

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8

PROJECT ECONOMICS
8.1 Project Cost Amount in (Rs.) 44,100 363,100 250,000 136,000 793,200 350,000 50,000 400,000 1,193,200

Description Machinery & Equipment Furniture & Fixtures Educational Tools Pre-operating costs Total Capital Cost Working Capital Upfront building rent (10 Months) Cash Total Working Capital Total Project Cost 8.2 Project Returns Description IRR MIRR Pay Back Period (Yrs) Net Present Value (NPV) 8.3 Project Financing Description Equity Financing Debt Financing Total Percentage 70% 30% Equity 40% 26% 4.0 1,363,065

Project 27% 17% 4.82 1,213,942

Amount in Rs 835,104 358,096 1,193,200

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9

FINANCIAL ANALYSIS
9. 1 Project Cost

Statement Summaries
Initial Investment
Capital Investment Land Building/Infrastructure Machinery & equipment Furniture & fixtures Office equipment Pre-operating costs Total Capital Costs Working Capital Upfront building rent Cash Total Working Capital Total Investment Initial Financing Debt Equity Rs. in actuals 44,100 363,100 250,000 136,000 793,200 Rs. in actuals 350,000 50,000 400,000 1,193,200 Rs. in actuals 358,096 835,104

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9. 2

Projected Income Statement
SMEDA
Year 1 Year 2 1,651,650 491,400 1,160,250 Year 3 2,233,424 687,960 1,545,464 Year 4 2,869,390 722,358 2,147,032 507,943 486,203 103,389 39,452 39,452 28,694 28,694 90,720 27,200 1,351,746 795,285 8,859 804,144 19,413 784,731 784,731 Year 5 3,563,513 948,095 2,615,418 533,340 510,513 109,278 41,424 41,424 35,635 35,635 90,720 27,200 1,425,170 1,190,249 24,826 100,000 1,315,075 5,221 1,309,854 123,128 1,186,726 Year 6 3,758,051 1,194,600 2,563,452 560,007 536,038 115,511 43,496 43,496 37,581 37,581 107,631 1,481,339 1,082,112 43,507 1,125,620 1,125,620 233,288 892,332 1,640,891 2,533,223 2,533,223 Year 7 3,942,104 1,254,330 2,687,774 588,007 562,840 122,107 45,670 45,670 39,421 39,421 107,631 1,550,769 1,137,005 65,214 1,202,219 1,202,219 261,235 940,984 2,533,223 3,474,207 3,474,207 Year 8 4,135,359 1,317,046 2,818,313 617,408 590,982 129,090 47,954 47,954 41,354 41,354 107,631 1,623,726 1,194,587 88,325 1,282,912 1,282,912 291,612 991,301 3,474,207 4,465,508 4,465,508 Rs. in actuals Year 9 Year 10 4,338,277 1,382,898 2,955,379 648,278 620,531 136,481 50,352 50,352 43,383 43,383 107,631 1,700,391 1,254,988 112,839 1,367,828 1,367,828 324,542 1,043,285 4,465,508 5,508,793 5,508,793 4,551,341 1,452,043 3,099,298 680,692 651,558 144,305 52,869 52,869 45,513 45,513 107,631 1,780,951 1,318,346 139,402 1,457,748 1,457,748 360,762 1,096,987 5,508,793 6,605,780 6,605,780

Statement Summaries
Income Statement

Revenue Cost of goods sold Gross Profit General administration & selling expenses Administration expense Rental expense Utilities expense Travelling & Comm. expense (phone, fax, etc.) Office expenses (stationary, etc.) Promotional expense Professional fees (legal, audit, etc.) Depreciation expense Amortization expense Subtotal Operating Income Other income Gain / (loss) on sale of assets Earnings Before Interest & Taxes Interest expense Earnings Before Tax Tax NET PROFIT/(LOSS) AFTER TAX Balance brought forward Total profit available for appropriation Dividend Balance carried forward

1,197,350 468,000 729,350

438,780 460,719 483,755 420,000 441,000 463,050 87,600 92,568 97,825 34,080 35,784 37,573 34,080 35,784 37,573 11,974 16,517 22,334 11,974 16,517 22,334 90,720 90,720 90,720 27,200 27,200 27,200 1,156,407 1,216,808 1,282,365 (427,057) (56,558) 263,098 3,650 540 (423,407) (56,558) 263,638 37,614 39,340 37,285 (461,021) (95,898) 226,353 (461,021) (95,898) 226,353 (461,021) (556,919) (556,919) (556,919) (330,566) (330,566)

(461,021) (461,021)

(330,566) 454,165 454,165 1,640,891 454,165 1,640,891

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9. 3

Projected Balance Sheet
SMEDA
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Rs. in actuals Year 10

Statement Summaries
Balance Sheet
Assets Current assets Cash & Bank Accounts receivable Pre-paid building rent Total Current Assets Fixed assets Machinery & equipment Furniture & fixtures Office equipment Educational Tools Total Fixed Assets Intangible assets Pre-operation costs Total Intangible Assets TOTAL ASSETS Liabilities & Shareholders' Equity Current liabilities Short term debt Total Current Liabilities Other liabilities Deferred tax Long term debt Total Long Term Liabilities Shareholders' equity Paid-up capital Retained earnings Total Equity TOTAL CAPITAL AND LIABILITIES

365,000 35,000 400,000 44,100 363,100 250,000 657,200 136,000 136,000 1,193,200

32,804 36,750 69,554 39,690 326,790 200,000 566,480 108,800 108,800 744,834

39,027 38,588 77,615 35,280 290,480 150,000 475,760 81,600 81,600 634,975

53,970 53,220 40,517 147,707 30,870 254,170 100,000 385,040 54,400 54,400 587,147

831,915 69,902 42,543 944,360 26,460 217,860 50,000 294,320 27,200 27,200 1,265,880

1,650,689 88,122 44,670 1,783,481 22,050 181,550 334,556 538,156 2,321,638

2,700,029 100,295 46,903 2,847,228 17,640 145,240 267,645 430,525 3,277,753

3,821,354 105,482 49,249 3,976,084 13,230 108,930 200,734 322,894 4,298,978

5,011,168 110,650 51,711 5,173,529 8,820 72,620 133,823 215,263 5,388,791

6,272,778 116,077 54,296 6,443,152 4,410 36,310 66,911 107,631 6,550,783

7,667,432 121,776 7,789,208 7,789,208

358,096 358,096 835,104 835,104 1,193,200
-

196,407 196,407 187,823 187,823 835,104 (474,500) 360,604 744,834
-

233,513 233,513 149,095 149,095 835,104 (582,737) 252,367 634,975
-

105,333 105,333 835,104 (353,289) 481,815 587,147
-

3,307 55,881 59,188 835,104 371,588 1,206,692 1,265,880
-

3,307 3,307 835,104 1,483,226 2,318,330 2,321,638
-

2,646 2,646 835,104 2,440,003 3,275,107 3,277,753
0

1,984 1,984 835,104 3,461,889 4,296,993 4,298,978
(0)

1,323 1,323 835,104 4,552,364 5,387,468 5,388,791
0

661 661 835,104 5,715,018 6,550,122 6,550,783
(0)

(0) (0) 835,104 6,954,104 7,789,208 7,789,208
0

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9. 4

Projected Cash Flow Statement
0 (0) 0 (0) 0

Statement Summaries
Cash Flow Statement
Year 0 Operating activities Net profit Add: depreciation expense amortization expense Accounts receivable Pre-paid building rent Cash provided by operations Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

SMEDA
Rs. in actuals Year 10

(35,000) (35,000)

(474,500) 90,720 27,200 (32,804) (1,750) (391,134)

(108,237) 90,720 27,200 (6,223) (1,838) 1,622

229,448 90,720 27,200 (14,193) (1,929) 331,246

724,877 90,720 27,200 (16,681) (2,026) 827,397

1,111,639 90,720 27,200 (18,220) (2,127) 1,209,211

956,777 107,631 (12,173) (2,233) 1,049,339

1,021,886 107,631 (5,186) (2,345) 1,121,325

1,090,475 107,631 (5,169) (2,462) 1,189,814

1,162,653 107,631 (5,427) (2,586) 1,261,611

1,239,086 107,631 (5,698) 54,296 1,394,654

Financing activities Change in long term debt 358,096 Change in short term debt Issuance of shares 835,104 Cash provided by / (used for) financing activities1,193,200 Investing activities Capital expenditure (793,200) Cash (used for) / provided by investing activities (793,200) NET CASH Cash balance brought forward Cash available for appropriation Dividend Cash carried forward 365,000

(170,273) 196,407 26,134

(38,728) 37,106 (1,622)

(43,763) (233,513) (277,276)

(49,452) (49,452)

(55,881) (55,881)

-

-

-

-

-

(365,000) 365,000 0 -

-

53,970 53,970 53,970

777,945 53,970 831,915 831,915

(334,556) (334,556) 818,774 831,915 1,650,689 1,650,689

1,049,339 1,650,689 2,700,029 2,700,029

1,121,325 2,700,029 3,821,354 3,821,354

1,189,814 3,821,354 5,011,168 5,011,168

1,261,611 5,011,168 6,272,778 6,272,778

1,394,654 6,272,778 7,667,432 7,667,432

365,000 365,000

18 BAL-PREF-03/April, 2004

Pre-feasibility Study

Day Care Center

10 KEY ASSUMPTIONS
10. 1 Capacity Utilization Assumptions 110 22 5 95% 35% 15% 2,300 5%

Total Students Capacity No. of students per class No. of Classes Maximum Attainable Capacity in Percentage Capacity Utilization (1st Year) Growth in Capacity Fee per month/student is Rs. Annual Fee Growth Rate 10. 2 Economic Assumptions

Electricity Price Growth Rate Gas Price Growth Rate Water Price Growth Rate Salary Growth Rate Rent Growth Rate Student Fee Growth Rate 10. 3 Expense Assumptions

6% 6% 3% 5% 5% 5%

Communication Expense Promotional Expense Professional Fee (Legal, Audit etc) Administration Benefit Expense Office Expense (Stationary, Entertainment, Janitorial Pre-Operational Expense 10. 4 Depreciation Expense Assumptions

8% of administration expense 1% of revenue 1% of revenue 3% of administration expense 8% of administration expense Rs. 136,000

Depreciation Method Equipment Furniture & Fixtures

Straight Line 10% 10%

19 BAL-PREF-03/April, 2004

Pre-feasibility Study

Day Care Center

10. 5

Cost of Goods Sold

It is assumed that cost of goods sold would be the direct labor cost which in this project is the salary cost of teachers and nannies only. All the other heads in the human resource are indirect labors (management staff). 10. 6 Student Capacity Assumptions No. of Classroom 2 1 1 1 5 Revenue Assumptions Monthly Fee 2,300 2,300 2,300 2,300 3,500 Maximum Student/Class 22 22 22 22 Total Capacity 44 22 22 22 110

Description Infant Care Program For Two Year Olds Play Group (3-4 year olds) Kindergarten(4-5 years) Total 10. 7

Description Infant Care Program For Two Year Olds Play Group (3-4 year olds) Kindergarten(4-5 years) Admission Fee 10. 8

Cash flow Assumptions 10 15 50,000

Accounts Receivables Cycle (In Days) Accounts Payable Cycle (In Days) Initial Cash in Bank 10. 9 Debt Equity Long Term Debt Interest Rate Short Term Debt Interest Rate Tax Treatment Discount Rate for NPV (WACC) Financing Assumptions

30% 70% 13% 12% Sole proprietorship 16%

20 BAL-PREF-03/April, 2004

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