EXHIBIT 3: PROJECTED ANNUAL PROFITABILITY/CASH FLOW ANALYSIS FOR FIVE YEARS Expected number of enrolments for 5...

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EXHIBIT 3: PROJECTED ANNUAL PROFITABILITY/CASH FLOW ANALYSIS FOR FIVE YEARS Expected number of enrolments for 5 years New enrolments Old enrolments Total expected strength in each year Expected revenue for 5 years (IN) Year 1 Year 2 Year 3 & onward 35 25 40 0 25 40 35 50 80 Fee collection from new students 18,800 18,800 18,800 (one time + annual) Fee collection from old students (annual) 16,300 16,300 Total fee collection (without caution money) (A) Year 1 18,800 x 35 658,000 877,500 1,404,000 Year 2 (18,800 x 25) + (16,300 x 25) Year 3 = (18,800 x 40) + (16,300 x 40) Anticipated expenses for 5 years Royalty at 1,200 per registration payable to franchisor 42,000 60,000 96,000 Salary of one senior trainer/faculty 84,000 96,000 1,08,000 Salary of junior faculty (two required in year 1; three required in 96,000 1,80,000 3,60,000 year 2; five required in year 3) Salary of nanny (two nannies required in year 1 and 2; three 60,000 72,000 108,000 required in year 3) Rent 180,000 198,000 216,000 Electricity 12,000 15,000 18,000 Office expenses 18,000 24,000 30,000 Advertising 24,000 30,000 30,000 Total expenses (B) 516,000 675,000 966,000 Operational profit (A - B) or earnings before interest & tax 142,000 202,500 438,000 Add: Interest on caution money at 8% Less: Interest on borrowed funds at 15% Earnings before tax 4,200 6,000 90,000 90,000 90,000 56,200 118,500 357,600 9,600 Less: Tax 20% 11,240 23,700 71,520 Earnings after tax (cash flows) 44,960 94,800 286,080 Note: Depreciation on assets was not considered in the case. Source: Compiled by the authors. EXHIBIT 3: PROJECTED ANNUAL PROFITABILITY/CASH FLOW ANALYSIS FOR FIVE YEARS Expected number of enrolments for 5 years New enrolments Old enrolments Total expected strength in each year Expected revenue for 5 years (IN) Year 1 Year 2 Year 3 & onward 35 25 40 0 25 40 35 50 80 Fee collection from new students 18,800 18,800 18,800 (one time + annual) Fee collection from old students (annual) 16,300 16,300 Total fee collection (without caution money) (A) Year 1 18,800 x 35 658,000 877,500 1,404,000 Year 2 (18,800 x 25) + (16,300 x 25) Year 3 = (18,800 x 40) + (16,300 x 40) Anticipated expenses for 5 years Royalty at 1,200 per registration payable to franchisor 42,000 60,000 96,000 Salary of one senior trainer/faculty 84,000 96,000 1,08,000 Salary of junior faculty (two required in year 1; three required in 96,000 1,80,000 3,60,000 year 2; five required in year 3) Salary of nanny (two nannies required in year 1 and 2; three 60,000 72,000 108,000 required in year 3) Rent 180,000 198,000 216,000 Electricity 12,000 15,000 18,000 Office expenses 18,000 24,000 30,000 Advertising 24,000 30,000 30,000 Total expenses (B) 516,000 675,000 966,000 Operational profit (A - B) or earnings before interest & tax 142,000 202,500 438,000 Add: Interest on caution money at 8% Less: Interest on borrowed funds at 15% Earnings before tax 4,200 6,000 90,000 90,000 90,000 56,200 118,500 357,600 9,600 Less: Tax 20% 11,240 23,700 71,520 Earnings after tax (cash flows) 44,960 94,800 286,080 Note: Depreciation on assets was not considered in the case. Source: Compiled by the authors.