multi-cultural fashion trends.

I am not looking for just the answer…. I dont know how to set this up…. and this kind of stuff is on the final.

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?