Q1. Jane’s Boutique Jane, a graduate from school of design, is passionate about multi-cultural fashion trends. She has specialized in fashion designs of the East, particularly those from India. She plans on opening a boutique selling Indian outfits.

Q1. Jane’s Boutique

Jane, a graduate from school of design, is passionate about multi-cultural fashion trends. She has specialized in fashion designs of the East, particularly those from India. She plans on opening a boutique selling Indian outfits. (You can see an example here)

She collects market data described as below.

Launch expenses	Dollars
Website development	30,000.00
Showrooming expenses	75,000.00
Licensing and other business incorporation fees	10,000.00
Initial capital	50,000.00
Launch Advertising	35,000.00
Total	200,000.00
Annual expenses	Dollars
Store lease -2000 sqft space in downtown Chicago	100,000.00
SGA	20,000.00
Salary	360,000.00
Total	480,000.00

She expects to sell 10,000 units in the first year at an average price of $100 with a 48% gross margin. In addition, she expects her business to grow at 10% per annum. She has approached you to help her create a worksheet and answer the following questions. (7.5- Points)

Assuming all launch investments take place in January 2015

1. What is the net income (or loss) every year from this business for the next five years?

2. Applying a discount factor of 12% what is the NPV (Net Present Value) of the income in these years?

3. What is the cumulative NPV after every year?

4. Considering the cumulative NPV when (which year) will the business breakeven?

10 years ago

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