Engineeric LLC Business Plan for E-2 Visa Contact: Email:
2 This is a sample Business Plan for E-2 Visa application. Figures are for illustrative purposes only. All personal information has been removed from the text. Это пример бизнес-плана для визы E-2 Все данные приведены исключительно в качестве иллюстрации Вся персональная информация, названия и адреса вымышлены.
3 Table of Contents TABLE OF CONTENTS ......................................................................................................... 3 EXECUTIVE SUMMARY ...................................................................................................... 4 The E-2 Visa Beneficiary........................................................................................... 5 U.S. COMPANY DETAILS .................................................................................................... 6 Company Ownership.................................................................................................. 6 Company Location ..................................................................................................... 6 INVESTMENT & FINANCIAL DETAILS ............................................................................ 7 Applicant Investment Details ..................................................................................... 7 Financial Highlights ................................................................................................... 7 BUSINESS DESCRIPTION .................................................................................................... 8 Process........................................................................................................................ 8 Services ...................................................................................................................... 8 The climbers’ team..................................................................................................... 9 MARKET ANALYSIS SUMMARY..................................................................................... 11 Industry Analysis...................................................................................................... 11 Target Market ........................................................................................................... 14 Competitors .............................................................................................................. 14 Competitive Edge ..................................................................................................... 15 STRATEGY & IMPLEMENTATION SUMMARY............................................................. 16 Objectives ................................................................................................................. 18 Marketing Channels ................................................................................................. 18 MANAGEMENT SUMMARY.............................................................................................. 19 FINANCIAL PROJECTION.................................................................................................. 20 APPENDIX: YEAR 1 FINANCIALS BY MONTH ............................................................. 27 CONCLUSION ...................................................................................................................... 29
4 Executive Summary Fifth-generation mobile networks, better known as 5G, are beginning to come to life. Major providers like Verizon, T-Mobile, and AT&T are launching the programs of the renovation of their equipment. The technology, which promises increased speed and capacity for more excellent connectivity, is expected to take shape in the years to come fully. According to experts, the industry needs 3 million specialists to implement all equipment replacement programs. At present, information communication technology giant Ericsson is putting the infrastructure in place that is needed to make 5G a reality, and cell tower climbers’ companies are in high demand to lay the groundwork. Engineeric LLC is one of these climbers’ companies and is going to participate in Ericsson infrastructure renovation. Ericsson currently has some 350,000 towers across the U.S. already in place, and the company is expecting to grow that number to 1 million in the next four years as it partners with the major U.S. carriers for 5G nationwide. Constriction modification works are an ongoing process. Therefore, climbers’ companies like Engineeric will be a stable demand. The Company will replace equipment (antennas, base stations, routers, and switches) on cell towers throughout the country. Today, the company has already signed an office lease agreement and hired qualified personnel. After training employees, obtaining all licenses, and purchasing equipment and instruments, the Company will start working.
5 The E-2 Visa Beneficiary The business activities described in this Business Plan will be overseen by Uku Masing, who will serve as the Company's Chief Executive Officer. Uku Masing has been ran own business in Estonia, where he was operating in development and property management business. Also, he has found a restaurant business that is successfully running up to date. As the CEO of Engineeric LLC, the Applicant will oversee a U.S.-based staff and guide the vision and growth strategy of the Company to increase revenue and manage the further expansion of the Company, staff training, and business development as a reliable climber's subcontractor. As a Company CEO, Uku Masing will bring Engineeric LLC her entrepreneurial experience and energy for the success of the Company.
6 U.S. Company Details Engineeric LLC is a company, which provides services of construction, maintenance, and industrial alpinism for owners of mobile wireless sites. The company specifies on the upgrades of 3G and 4G cellular towers up to 5G standards. The company was registered in the U.S. on 18 February 2020. Company Ownership The company is owned by Uku Masing (100%). Uku Masing is a national of Estonia. Company Location The company will maintain a physical office in the following location: 936 Albany St, Los Angeles, CA 90015
7 Investment & Financial Details Applicant Investment Details The applicant will contribute $150,000 of personal capital as cash. Financial Highlights The following table and graph illustrate the business goals of the company during the next five years: Table 1 Financial highlights 2020 2021 2022 2023 2024 Total Revenue 370 888 489 848 628 926 790 802 808 200 Gross Margin 272 305 359 753 461 895 580 162 592 926 Operating Expenses 278 421 328 703 386 041 450 632 452 098 EBITDA -6 115 31 051 75 855 129 531 140 828 Net Profit -35 198 16 892 47 359 83 859 91 541 Profitability Ratios Gross Margin/Revenue 73% 73% 73% 73% 73% EBITDA/Revenue -2% 6% 12% 16% 17% Net Profit % -9% 3% 8% 11% 11% Net Cash Flow 5 278 23 101 53 568 90 068 97 750 Cash Balance - Ending 5 278 28 379 81 947 172 015 269 765 Figure 1 Financial highlights
8 Business Description Process Engineeric LLC is a climbers’ company fulfilling the groundwork at the cell as a subcontractor. The Company takes part in the upgrade of the U.S. mobile networks from 4G to 5G. The final beneficiaries of the upgrade are mobile carriers such as AT&T, Verizon, etc. The process of service orders is presented in Figure 2. Services Engineeric LLC provides two vital services. The first service is the upgrade of the existing cell site of 3G or 4G standard up to 5G standard. The second is construction works on the cell tower sites. • The upgrade of cell phone towers for 5G cost is about $6 300 for one tower site (with two carriers). • The construction modification works cost is about $9 000 for one tower site. These services consist of the following works: Figure 2 The service order process Engineeric LLC.
9 • Installation/de-installation services (Top hats, mounts, fiber, coaxial cable, antennas, radios, etc.) • UMTS / GSM upgrades and Line change out • Small cells installation • Install ice bridge, cable tray, cable ladder • Install ground kits, connectors, and buss bars • Antenna installation services • Platform installation and rotations • Platform reinforcement • Azimuth and tilt adjustments • Sweep/PIM testing antenna system and in-line components • Fiber testing • The clear site and compound of debris and dispose • Decommission lines and antennas, TMA’s, diplexers, platforms, etc. • Telco backhaul integration The climbers’ team A climbers’ team fulfills all works on the mobile tower site. The team consists of four persons: • Crew leader; • Top hand climber (two persons); • Climber helper. All staff owes to be well trained and to have all the necessary certificates, as follows: Crew leader • Comtrain1 competent rigger certification; • First Aid certification; • RF (radiation) certification; • OSHA 10 (10 hours training). Top hand climbers 1 Comtrain courses meet the criteria for Accepted Practices in Safety, Health, and Environmental Training ASSE/ANSI Z490.1, the highest industry standard for training. They also meet the requirements of ASSE/ANSI Z359.2, the minimum requirements for a Comprehensive Managed Fall Protection Program, found in the ASSE/ANSI Z359 Fall Protection Code. The Comtrain Competent Tower Rigging Course addresses the new ASSE/ANSI A10.48-2016 standards.
10 • Comtrain competent climber certification; • First Aid certification; • RF (radiation) certification; • OSHA 10 (10 hours training). Climber helper • Comtrain authorized climber certification, • First Aid certification, • RF (radiation) certification, • OSHA 10 (10 hours training). Total certificate expenses per one of the climber’s team members are about $3000. Also, a climbers’ team has to use a lot of professional equipment (see the Strategy Implementation section).
11 Market Analysis Summary Industry Analysis At present, almost every developed country surveyed has at least 90 percent of mobile device penetration. In any restaurant, sit on any bus one can find at least 9 out of the ten people on their smartphone. Whether it’s for texting, surfing the Internet, or watching a favorite show, the mobile device is now a fixture of modern living. Giving the smartphone a boost is the growing availability of 4G connectivity across the globe. Mobile networks such as 4G/LTE have begun to catch up with Wi-Fi as the preferred means of connecting to the Internet from mobile devices. The U.S. started deploying 4G years ago and now has mass-market coverage (about 80%2). Over the years, this massive network has evolved. Companies and governments built a new infrastructure to support the next generation of wireless connectivity. The actual quantity of mobile cell sites is about four hundred thousand growing with CAGR of 6,95% (see Figure 3)3. But today’s 4G network faces a problem with data throughput. Both consumers and businesses have a seemingly endless thirst for consuming and sending more data over wireless networks. And 18 exabytes of data (and growing) are transmitted every 2 Source: Deloitte, Global mobile consumer trends 3 Source: Statista.com Figure 3 The number of mobile wireless cell sites in the U.S.
12 month, and 4G networks provide now slower internet and less stable communications (see Figure 4). The U.S. average internet speed is in the 38th place, behind countries like Romania and Finland. At an economic level, it’s a significant competitive disadvantage. Work and digital services are mobile these days. Many companies have a “mobile first” strategy that prioritizes access to products or services via mobile devices like smartphones. America’s overloaded 4G networks could soon pose a serious threat to the economy’s ability to keep pace with the rest of the world. And the solution of the problem is to upgrade the U.S. failing communications infrastructure to the next generation of wireless connectivity: fifth-generation, or 5G. This upgrade is a business that Engineeric LLC is going to take part. With 5G, the peak speed jumps to 10 gigabits per second (Gbps). One gigabit is 1,000 megabits. So at peak speed, 5G will be about 1,000 times faster than the average 4G connection we have today. 5G is a game-changer because of all the technological innovations it will bring about. Another significant effect is that 5G will create an additional three million jobs. That includes jobs associated with building and maintaining the wireless networks, as well as jobs related to products and services that will be created thanks to the high speeds of 5G. It will also add about $500 billion in U.S. GDP growth. Figure 4 Voice and data transmission
13 While the infrastructure buildout will take years to cover the entire country, 5G services are ready to launch in a handful of cities starting in a matter of weeks. The forecast for the 5G adoption rate is presented in Figure 5. Market Segmentation There are be three following segments of 5G implementation in the U.S.: 1. Physical network buildout – infrastructure (towers, fiber-optic networks) and equipment (antennas, base stations, routers, and switches) million jobs created in the U.S. 2. Wireless devices (smartphones, tablets, home routers, etc.) that run on the new 5G network and the components that go inside them 3. Services – companies that deploy services that take advantage of the 5G network Engineeric LLC will make a business in the 1st one. The total 5G market characteristics are presented in Figure 6 Figure 5 5G adoption rate in the U.S., % Figure 6 5G market characteristics
14 Target Market The 5G network architecture has changed compared to 4G. 3G and 4G technology used wireless towers that could cover 30-45 miles over flat terrain. But 5G is entirely different. It uses what’s called “small cell architecture,” which requires far more cell phone tower locations. For major metropolitan areas, this could mean one small cell phone tower on almost every street corner. Today, there are about 350,000 cell phone towers across the U.S. Yet, when the 5G network is constructed, there will be more than 1,000,000 cell phone towers to support the higher bandwidth, higher speeds, and new services delivered over 5G. That’s a considerable increase in the number of towers needed for 5G compared to the previous generation, at least – 750 thousand, or at least $9 Billion in terms of revenue of climbers’ firms. Competitors Engineeric LLC will compete in the market with the same climber’s companies working for the contractors. Our contractor is Brightel Solutions Inc. - a tower construction and technical services company, providing professional services and maintenance of a wide variety of telecommunication projects and upgrades. Working with customers, such as Ericsson, is the responsibility of the contractor. In turn, our responsibility is the quality execution of orders received from the contractor. Work must be completed in a short time according to an agreed schedule. It should be noted that given a large amount of work on a national scale, the number of climbers ’companies are insufficient, so all of them will be provided with orders. Consequently, competition in the market is not very high, and the main task of companies will be the quality performance of work in the interests of the contractor. The level of income of the companies will depend on labor productivity and the term of work on the site.
15 Competitive Edge The business of upgrading cell towers is associated with the implementation of a large number of projects that differ from each other in the volume of work performed. At its core, this is one large project consisting of many less complicated projects. An essential competitive advantage in this business is an experience in project management, the ability to correctly assess the amount of work, negotiate with clients so as not to assume unfulfilled obligations and respond correct way when clients begin to erode the scope of work or make excessive demands. A competent staff, proper equipment, or management of employees are also essential, but project management skills are the critical success factor in this business. This skill is what Uku Masing can bring to the Company due to his higher education and experience in the property development business.
16 Strategy & Implementation Summary Engineeric LLC is planning to start a business as a climbers’ company in the 2020 year. For this purpose, it has to organize staff teaching and certification and to buy all the necessary equipment. The start expenses are presented in Table 1: Table 1 Start expenses Item of expenditure Cost ($) Pickup truck Ford 350 70 000 Trailer 4 500 Insurance 8 000 Company registration 250 Legal fee 3 000 Business plan development 2 500 Climber tools 49 181 Staff certification 12 000 Total 149 431 List of the tools necessary for the climbers’ team is presented in Table 2: Table 2 Climbers' tools list Item Cost ($) AB Chance 3,000 Pound Capstan Kit 7,799.99 3M DBI Sala Kernmantle Rope 2,480.40 Sterling HTP Static Rope with Eye 754.70 Customize GME Supply HAM Radio Premium Kit 1,146.98*4 GME Supply Tower Rescue Kit 1,245.00 FallTech Leading Edge Restraint Twin Leg Lanyard with Rebar Hooks and D-Ring 235.99*4 DBI Sala Rollgliss R550 Rescue and Descent Kit with Humidity Storage Case 2,179.99 GME Supply Yellow Sling Pack 234.99*5 Sterling Rope 11/16 Inch Nylon Slings 17.09*40 Stronghold by Ty-Flot Tool Bucket With Triple Lock Carabiner 119.99*6 DBI Sala Utility Pouch 43.99*4 Ergodyne Arsenal Small Tool and Radio Holster 20.99*4 DBI Sala Medium Tape Measure Sleeve 15.99*3 GME Supply Premium Gear Bag 79.99*4
17 DBI Sala ExoFit Strata Tower Climbing Harness with Tongue and Buckle Leg Straps 824.99*4 Job Site Safety Banner with 1 Pocket, Custom Logo 99.99 Petzl L052CA GRILLON HOOK U Adjustable Positioning Lanyard 244.95*4 Petzl Tower Rescue Solution Kit 1,522.00 FieldSENSE 2.0 Personal RF Monitor 599.99 Kong Extra Roll Pulley 62.64 Kask Super Plasma Hi-Viz Safety Helmet 139.95*4 JSP MK8 Evolution Type II Linesman Hard Hat with HDPE Shell 59.99*4 3Z RF Vision Antenna Alignment Tool 9,785.00 Izzy Universal 2 Hole Long Barrel Copper Compression Lug with Inspection Window (100 Pack) 142.50 Izzy Industries UL Listed Cable Ties (100 Pack) 33.25*10 GME Supply HAM Radio Premium Kit 1,146.98*4 Kenwood KMB-27 Six Unit Charging Rack 199.99 DBI Sala Lad-Saf X2 Detachable Cable Safety Sleeve 487.99*4 Tuf Tug TTQCL-1500 Load Rated Carabiner 32.95*20 Petzl I'D Self-Braking Descender 319.95*3 total We plan to equip the climbers’ team and train specialists within one month. After that, Engineeric LLC will be ready to proceed with the mobile towers equipment upgrade.
18 Objectives • Establish a U.S. headquarters in California; • Utilize U.S. presence to benefit from domestic workforce talents; • Train staff to meet certification requirements; • Establish a strong partnership with the contractor as a reliable subcontractor able to provide high-quality work; • Create a strong brand reputation; • Enhance client relations to sustain the business and make it's future growth possible; • Generate enough revenue to expand operations; • Further business development. Marketing Channels Though the company finds its clients with the help of the contractor (Brightel Solutions Inc.), Engineeric LLC is going to use a variety of advertising channels and build business networking to increase its professional reputation on the market and create more business. Online promotion: Climbers business is an offline business; Engineeric LLC cannot provide its services online. But since customers spend most of their time online, the online promotion will occupy an important place in the company's strategy. For example, a modern website, search engine optimization, social media marketing, etc. Cross-promotion: Engineeric LLC is going to use cross-promotional marketing with non-competing but related businesses. These partnerships will be mutually beneficial and will help increase brand awareness in the target market for both the company and affiliate partners. Referral marketing: Although people try to find the credibility of a business through search engines, whenever they can get referrals from someone they trust, they are sure to take it. Engineeric LLC is going to have a healthy relationship with suppliers of the materials and services that can bring a lot of referrals that can turn into an actual business. Also, we are sure that current clients will highlight the Company's proven expertise to their own personal and professional contacts. It will generate valuable leads as well as a strong base of prospective new clients.
19 Management Summary The management structure of the company will be as follows: Uku Masing, Founder & Chief Executive Officer. Uku Masing has a bachelor’s degree in Economics and comes from a background of entrepreneurship. He has ten years of professional experience in the development of business and property management, and the catering industry gained on projects ranging from property repair for resale to demolition of buildings and new construction in their place. He is experienced in managing all facets of a business and has a high level of technical understanding that allows her to interface with technical specialists effectively. While he brings a diverse background in strategic leadership in the construction business to his role at Engineeric LLC, Uku Masing also delivers unique and valuable insight into the personnel management. His ability to understand the scope of work in the construction projects will help Engineeric LLC to negotiate with customers and conclude profitable deals confidently. Another manager is the technical director of the company. He will also act on site as the crew leader. He will directly manage the climbers. Now, this position is vacant, and Uku Masing is negotiating with a successful candidate. Figure 7 The Company organizational chart Climber (specialist) Climber (junior)
20 Financial Projection The following is a five-year revenue forecast. Direct costs include all costs which can be directly tied to revenue. Table 2 Revenue and COGS forecast 2020 2021 2022 2023 2024 Revenue Update of a cell phone tower for 5G 152 719 207 994 258 282 310 651 330 386 Construction and modification works 218 169 297 134 368 974 443 787 471 980 Total Revenue 370 888 505 128 627 255 754 437 802 366 Direct Cost of Revenue Business trips: Gasoline 36 422 48 064 61 711 77 823 79 535 Business trips: hotel rooms 53 419 70 494 90 509 114 140 116 651 Business trips: food 8 741 11 535 14 811 18 677 19 088 Total Direct Costs 98 583 130 094 167 031 210 640 215 274 Gross Margin 272 305 375 034 460 225 543 797 587 092 Gross Margin/Revenue 73% 74% 73% 72% 73% The table below shows the units and pricing assumptions underlying the revenue forecast: Table 3 Unit forecast 2020 2021 2022 2023 2024 Units Update of a cell phone tower for 5G 24 32 39 46 48 Construction and modification works 24 32 39 46 48 Total Units 48 64 78 92 96 Unit Price Update of a cell phone tower for 5G 6 427 6 562 6 700 6 847 6 998 Construction and modification works 9 181 9 374 9 571 9 782 9 997 Direct Unit Cost Update of a cell phone tower for 5G 4 108 5 421 6 960 8 777 8 970 Construction and modification works 4 108 5 421 6 960 8 777 8 970
21 During the first year, the company plans to carry out work at two sites per month. After gaining experience, Engineeric LLC will be able to increase the volume of work in 2 times per season, and from 2023 to reach the maximum possible productivity in the season - up to 8 towers per month (see Figure 7). Due to the increase in productivity, the company's revenue will also grow year-onyear (see Figure 8). Figure 8 Cell sites services monthly Figure 9 Annual revenue
22 The company’s personnel forecast is outlined below. Personnel wages indicate the average salary per position, and personnel costs are total wages for each job. Table 4 Personnel forecast 2020 2021 2022 2023 2024 Year end personnel count Chief Executive Officer 1 1 1 1 1 Technical Director 1 1 1 1 1 Climber helper 1 1 1 1 1 Top hand climber 2 2 2 2 2 Total personnel 5 5 5 5 5 Personnel Wage Chief Executive Officer 4 000 4 084 4 170 4 257 4 347 Technical Director 500 511 521 532 543 Climber helper 350 357 365 373 380 Top hand climber 200 204 208 213 217 Personnel costs Chief Executive Officer 48 000 48 000 48 000 48 000 48 000 Technical Director 60 000 77 500 97 500 120 000 120 000 Climber helper 84 000 108 500 136 500 168 000 168 000 Top hand climber 24 000 31 000 39 000 48 000 48 000 Total costs 216 000 265 000 321 000 384 000 384 000 The company intends to deploy its funding to maximize growth and profitability. In the Profit and Loss table below, gross margin equals revenue minus direct costs. The “bottom line” or profit (as measured before and after interest, taxes, depreciation, and amortization) equals gross margin minus operating expenses. Table 5 Profit and Loss statement 2020 2021 2022 2023 2024 Gross revenue 370 888 489 848 628 926 790 802 808 200 COGS 98 583 130 094 167 031 210 640 215 274 Salary and wages 216 000 265 000 321 000 384 000 384 000 General costs 62 421 63 703 65 041 66 632 68 098 Other expenditures 25 750 - - - - Total costs 402 753 458 797 553 072 661 271 667 371 Earnings before interest, taxes, depreciation and amortization (31 865) 31 051 75 855 129 531 140 828 Amortization 4 657 6 209 6 209 6 209 6 209 Earnings before interest and taxes (36 522) 24 842 69 646 123 322 134 619 Interest paid - - - - - Profit before taxes (36 522) 24 842 69 646 123 322 134 619 Federal net income tax (1 324) 3 726 10 447 18 498 20 193 State net income tax - 2 981 8 358 14 799 16 154 Net profit (35 198) 16 892 47 359 83 859 91 541 Profit accrual (370 933) (361 818) 103 642 943 773 2 008 071
23 The chart below demonstrates when the company is expected to become profitable. Break-even occurs when revenue equals expenses. According to the financials, month 19 will be the point at which break-even will occur. Figure 10 Break-even analysis
24 The following depictions of the company’s projected cash flow show that the company expects to maintain sufficient cash balances over the five years of this plan. The “pro forma cash flow” table differs from the “pro forma profit and loss” (P&L) table. Pro forma cash flow is intended to represent the actual flow of cash in and out of the company. In comparison, the revenue and expense projections on the P&L table include “noncash” items and exclude funding and investment illustration. Table 6 Cash flow statement 2020 2021 2022 2023 2024 Cash at the beginning of the period - 5 278 28 379 81 947 172 015 Cash received from customers 370 888 489 848 628 926 790 802 808 200 COGS (98 583) (130 094) (167 031) (210 640) (215 274) Operating profit margin 272 305 359 753 461 895 580 162 592 926 Salary and wages (216 000) (265 000) (321 000) (384 000) (384 000) General costs (62 421) (63 703) (65 041) (66 632) (68 098) Interest paid - - - - - Taxes 1 324 (7 949) (22 287) (39 463) (43 078) Cash flow from operating activities (4 791) 23 101 53 568 90 068 97 750 Land - - - - - Building costs - - - - - Purchase of equipment (124 181) - - - - Other expenditures (25 750) - - - - Cash flow from investing activities (149 931) - - - - Proceeds from capital contributed 160 000 - - - - Proceeds from loan - - - - - Payments on loan - - - - - Cash flow from financing activities 160 000 - - - - Net cash flow 5 278 23 101 53 568 90 068 97 750 FCFF (154 722) 23 101 53 568 90 068 97 750 Cash at the end of the period 5 278 28 379 81 947 172 015 269 765
25 The balance sheet below highlights the company’s projected assets, liabilities, and capital: Table 7 Pro forma balance sheet UM 2020 2021 2022 2023 2024 Assets dollars 124 802 141 694 189 053 272 912 364 453 Fixed assets dollars 119 524 113 315 107 106 100 897 94 688 PP&E dollars 119 524 113 315 107 106 100 897 94 688 Investments inprogress dollars - - - - - Current asstes dollars 5 278 28 379 81 947 172 015 269 765 Accounts receivable dollars - - - - - Inventories dollars - - - - - Cash dollars 5 278 28 379 81 947 172 015 269 765 TOTAL ASSETS dollars 124 802 141 694 189 053 272 912 364 453 Equity and liabilities dollars 124 802 141 694 189 053 272 912 364 453 Owner's equity dollars 124 802 141 694 189 053 272 912 364 453 Capital stock dollars 160 000 160 000 160 000 160 000 160 000 Retained earnings dollars (35 198) (18 306) 29 053 112 912 204 453 Long-term debts dollars - - - - - Long-term debts dollars - - - - - Short-term debts dollars - - - - - Short-term debts dollars - - - - - Accounts payable dollars - - - - - Taxes payable dollars - - - - - TOTAL EQUITY AND CAPITAL dollars 124 802 141 694 189 053 272 912 364 453
26 The chart in Figure 11 shows a sensitivity analysis of the project. The purpose of the sensitivity analysis is to determine the extent to which a change in the project's input data affects its financial result. It identifies the critical limits of change in these data. For example, levels of revenue decrease or expenses increase that leave the NPV (net present value) positive. The more extensive these limits are, the less risky the project is. The sensitivity analysis algorithm is as follows: we change the selected parameters, reducing them by 50%, and then, increasing by 50% in 10% increments, after each change, we recalculate its economy and display the size (NPV) on the graph. As can be seen from the chart, the project NPV remains positive while the revenue decrease by 3%, and salaries increase by 2%, capital expenditures by 20%. Figure 11 Sensitivity analysis
Appendix: Year 1 Financials by Month Table 8 Cash Flow Month 1 2 3 4 5 6 7 8 9 10 11 12 Cash at the beginning of the period - 9 399 8 746 8 124 7 534 6 975 6 932 6 437 5 973 5 983 5 583 5 215 Cash received from customers 30 600 30 656 30 711 30 767 30 823 30 879 30 935 30 991 31 047 31 104 31 160 31 217 COGS (8 120) (8 150) (8 164) (8 179) (8 194) (8 209) (8 224) (8 239) (8 254) (8 269) (8 284) (8 299) Operating profit margin 22 480 22 506 22 547 22 588 22 629 22 670 22 711 22 752 22 794 22 835 22 876 22 918 Salary and wages (18 000) (18 000) (18 000) (18 000) (18 000) (18 000) (18 000) (18 000) (18 000) (18 000) (18 000) (18 000) General costs (5 150) (5 159) (5 169) (5 178) (5 187) (5 197) (5 206) (5 216) (5 225) (5 235) (5 244) (5 254) Interest paid - - - - - - - - - - - - Taxes - - - - - 484 - - 441 - - 398 Cash flow from operating activities (670) (653) (622) (590) (559) (43) (495) (464) 10 (400) (368) 63 Land - - - - - - - - - - - - Building costs - - - - - - - - - - - - Purchase of equipment (124 181) - - - - - - - - - - - Other expenditures (25 750) - - - - - - - - - - - Cash flow from investing activities (149 931) - - - - - - - - - - - Proceeds from capital contributed 160 000 - - - - - - - - - - - Proceeds from loan - - - - - - - - - - - - Payments on loan - - - - - - - - - - - - Cash flow from financing activities 160 000 - - - - - - - - - - - Net cash flow 9 399 (653) (622) (590) (559) (43) (495) (464) 10 (400) (368) 63 FCFF (150 601) (653) (622) (590) (559) (43) (495) (464) 10 (400) (368) 63 Cash at the end of the period 9 399 8 746 8 124 7 534 6 975 6 932 6 437 5 973 5 983 5 583 5 215 5 278
28 Table 9 Balance Sheet Month 1 2 3 4 5 6 7 8 9 10 11 12 Assets 133 580 132 927 132 305 131 197 130 121 129 561 128 548 127 567 127 059 126 142 125 257 124 802 Fixed assets 124 181 124 181 124 181 123 664 123 146 122 629 122 111 121 594 121 076 120 559 120 042 119 524 PP&E - - 124 181 123 664 123 146 122 629 122 111 121 594 121 076 120 559 120 042 119 524 Investments in-progress 124 181 124 181 - - - - - - - - - - Current assets 9 399 8 746 8 124 7 534 6 975 6 932 6 437 5 973 5 983 5 583 5 215 5 278 Accounts receivable - - - - - - - - - - - - Inventories - - - - - - - - - - - - Cash 9 399 8 746 8 124 7 534 6 975 6 932 6 437 5 973 5 983 5 583 5 215 5 278 TOTAL ASSETS 133 580 132 927 132 305 131 197 130 121 129 561 128 548 127 567 127 059 126 142 125 257 124 802 Equity and liabilities 133 580 132 927 132 305 131 197 130 121 129 561 128 548 127 567 127 059 126 142 125 257 124 802 Owner's equity 133 580 132 927 132 305 131 197 130 121 129 561 128 548 127 567 127 059 126 142 125 257 124 802 Capital stock 160 000 160 000 160 000 160 000 160 000 160 000 160 000 160 000 160 000 160 000 160 000 160 000 Retained earnings (26 420) (27 073) (27 695) (28 803) (29 879) (30 439) (31 452) (32 433) (32 941) (33 858) (34 743) (35 198) Long-term debts - - - - - - - - - - - - Long-term debts - - - - - - - - - - - - Short-term debts - - - - - - - - - - - - Short-term debts - - - - - - - - - - - - Accounts payable - - - - - - - - - - - - Taxes payable - - - - - - - - - - - - TOTAL EQUITY AND CAPITAL 133 580 132 927 132 305 131 197 130 121 129 561 128 548 127 567 127 059 126 142 125 257 124 802
Conclusion Let's summarize the data presented above: • The U.S. mobile networks are growing fast (CAGR 6,95%) • The industry is on the verge of the mass upgrade of mobile communications equipment, which will require a large number of specialists • The upgrade will create about 3 million jobs in the US • The investment period of the project is short, and the Company may start working in a month. • Uku Masing will invest $160 thousand and the company will reach a breakeven point in the 19th month. The total Company profit (excluding owner’s salary) will $204 thousand, big enough to make the investment idea attractive. Based on all the above, it can be concluded that financing the project is a productive investment with low risk.
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