What the study tells us
The plant can work, but only if it sells at market-level prices in the volume planned. Its weakness is sales capability, not cost or rent. The conditions on the conclusion page should be met before the machines are ordered.
The client's prices, with our estimate for management and one installation crew added, and fewer desk and shelf orders (they are priced above Kitea). The full assumptions are on the scope page.
On that basis the five-year NPV is ($74,658) at the 21.1% cost of capital, the IRR over 60 months is 15.1% (below that cost of capital), the year-5 net margin is 17.2% (above the 15% advantage line), and cash pays back in month 44. The client's plan as submitted, without management or an installation crew, shows a five-year NPV of $70,236: most of the difference is those missing costs.
Market-level prices (the higher of our production cost × 1.6 and Kitea Ghana), B2B room packages, installation as a separate fee, a full cost base and the four improvements.
The plan clears the 21.1% cost of capital, but only just: an IRR of 22.0% and a five-year NPV of $17,197. At prices 10% below plan the five-year NPV falls to ($213,409), which is why a price test comes before any machine is ordered.
Revenue and net profit
Revenue and net profit, USD
| Year | Revenue | Net profit |
|---|---|---|
| Year 1 | $315,328 | ($36,200) |
| Year 2 | $768,506 | $162,533 |
| Year 3 | $785,340 | $148,499 |
| Year 4 | $792,431 | $140,440 |
| Year 5 | $800,212 | $137,939 |
Revenue more than doubles in year 2 as projects reach 300 m² a month, then flattens. Net profit peaks at $162,533 in year 2 and falls as costs rise with no further growth.
Revenue and net profit, USD
| Year | Revenue | Net profit |
|---|---|---|
| Year 1 | $417,561 | ($42,444) |
| Year 2 | $1,093,919 | $195,150 |
| Year 3 | $1,202,620 | $221,465 |
| Year 4 | $1,378,325 | $280,667 |
| Year 5 | $1,570,238 | $351,846 |
Year 1 is a loss year while projects ramp up and the first B2B contract is delivered. From year 2, growth comes mostly from online and B2B; net profit reaches $351,846 in year 5.
Base and Recommended
| Base | Recommended | |
|---|---|---|
| NPV, 5 years | ($74,658) | $17,197 |
| IRR, 5 years | 15.1% | 22.0% |
| Net margin, year 5 | 17.2% | 22.4% |
| Equity needed | $641,313 | $718,405 |
The recommended option is the one we would plan and fund against: its prices can be tested in the market and its cost base is complete. The full comparison is on the financial page.
What we would like you to take away
- The weakness is sales capability, not cost or rent. What decides the result is the price a new brand can hold, and the project and B2B volume it can win.
- Funding: an equity commitment of $850,000 in three instalments, with returns measured on the money actually needed. Rent paid 36 months upfront stays, as a funding item.
- A price test comes first. The full conditions are on the conclusion page.