Statement of Financial Projections
Downloadable Version
Explanation
We started the financial projections assuming that we would need additional start-up funds, so we have an initial loan of $50,000, with a $20,000 down payment. This would give us enough funds to cover our initial capital investments as well as some of the initial debts that our application would likely incur. The initial investment of $9,000 is based on current computer and server costs, assuming that we would not need to spend too much given that our application would remain relatively small at first. It is safe to assume that the computers and servers will depreciate to relatively zero in five years, when the machines will be outdated, so depreciation was calculated over a straight line over five years. Maintenance costs were based on relative costs of equipment over the ten year projection. Overhead costs are based on approximate cost of land and utilities in relatively rural areas similar to State College, where an office could be held for the computers and servers. Advertisement costs would be higher for the first two years given that they are the most important years for growth in order to turn negative revenues to positive revenues. Less money also needs to be spent on advertisement once the application becomes popular, as it will receive enough attention without paying for advertisement. Our income from ad-space is based on relative income that similar apps generate from ad-space, and the relative amount of users our application would receive over time. Our income from the sales of the mobile application is based on a $1.00 dollar price, assuming that a small percentage around 5 to 15 percent of users would buy the application. Our final source of revenue is the sale of application subscriptions to restaurants. Each individual restaurants would pay a $100.00 a year subscription fee to be listed on our mobile application service, and our income projections are based on the predicted number of restaurant subscribers we would have and the 100 dollar per year subscription. In the Networking capital section, over the 10 year projection we will be paying off the $30,000 dollar loan in the accounts payable. It is not predicted that we will offer many services on credit, so the accounts receivable will remain at $0.00 for the 10 years. After finishing all these projections, we are predicting that this will be a very favorable project, with the application having positive returns by year 3, and substantial earnings by year 6, as well as a project Net Present Value of close to 2 million dollars.