2

Contents List

Abstract and Introduction............................................................3

Initial Data....................................................................................4

Calculations..................................................................................6

Cash Flow.....................................................................................10

Present Worth Analysis................................................................11

Conclusion...................................................................................14

3

ABSTRACT

We as economic analysts are evaluating thefeasibility of establishing a new company. B-Safe is a company focusing on the aviation safety belt industry. We are going to calculate if this business plan of ours can be accepted or not. We will use the Present Worth method to conduct our analysis.

B-SAFEIntroduction

B-Safe is a company aspiring to launch itself as an aircraft seatbelts manufacturer. They possess a unique ambition to be the first provider of seatbelt airbag systems and a range of other safety restraint products for the aerospace industry. They want to be one of the most advanced companies for aviation safety in the world.

They intend to manufacture products used in both commercial and general aviation, in civilian applications, and that can be found in automotive child seats too. Protecting passengers is a priority to B-Safe and hopefully their products should help move millions of people and countless tons of cargo safely and securely in the air and on the ground. These are some of their potential products:

Seatbelt Airbag System Cargo Containment Solutions Child Seat Restraints Aviation Passenger & Crew Restraints Aircraft Interior Safety

B-Safe is focused and committed to providing quality products and timely, cost-effective solutions to customers worldwide.

4

Initial DataCost

Capital Investment = $80,000,000

Utilities

Name Unit Consumption/Hr Cost/ UnitElectricity KWh 300 $0.12Water Cm^3 1667 $0.001

Escalations = 5%

Operations

Name Unit Consumption/Hr Cost/ UnitScientist Hour 10 $150Worker Hour 12 $20Engineers Hour 12 $70Securities Hour 24 $15

Raw Materials

Names Unit Consumption/Month Cost/UnitAluminium Ton 10 $1800Steel Ton 10 $480Nylon Kg 5000 $3.5Nitrogen Lt 100000 $10Polyesters Ton 5 $470

Escalations: 1.5%

Miscellaneous

Names Unit Consumption/Year Cost/unitMaintenance Machine 5 $20000Fuel of Transportation $30000

5

Revenues

Marginal Cost

Marginal Revenue Expected Revenue Product

Airframe Barrier Nets/net $700 $1,500 $1,200,000 800Seatbelt Airbags/seat $350 $800 $4,800,000 6000Child Aviation Restraints System-

CARES $250 $800 $1,800,000 2250Crew Restraints $200 $500 $2,000,000 4000Lightweight Seatbelt $300 $700 $2,800,000 4000Commercial Passenger Restraint $200 $600 $4,200,000 7000Business Jet Restraint $400 $800 $6,000,000 7500Rotorcraft Jet Restraint $300 $600 $2,400,000 4000Ground Vehicle Restraint $250 $500 $2,200,000 4400Interior Products Baby Bassinet $600 $1,000 $500,000 500Child Seats $700 $1,200 $1,200,000 1000

Calculations

6

Cost

Utilities

Escalations = 5%

Electricity:

Consumption per hour = 300 kWh

Consumption per year = 300*24*265

=2,628,000 kWh

Cost per unit = $0.12

Total Cost per Year = $315,360

Water:

Consumption per hour = 1667 cm^3

Consumption per year = 1667*24*365

= 14602920 cm^3

Cost per unit = $0.001

Total Cost per Year = $14,602

Operations

Scientist (5 People):

Works per day = 10 Hours

1 Week = 5 Days of work = 50 Hours

1Year = 50* 52 = 2600 Hours

Cost per Person = $150

Total Cost per Year for 1 Scientist = $390,000

Total Cost per Year for 5 Scientist =$1,950,000

Workers (20 People):

7

Works per day = 12 Hours

1 Week = 6 Days of work = 72 Hours

1Year = 72* 52 = 3744 Hours

Cost per Person = $20

Total Cost per Year for 1 Worker = $74880

Total Cost per Year for 20 Worker =$1,497,600

Engineers (10 People):

Works per day = 12 Hours

1 Week = 5 Days of work = 60 Hours

1Year = 60* 52 = 3120 Hours

Cost per Person = $70

Total Cost per Year for 1 Engineers = $218,400

Total Cost per Year for 10 Engineers =$2,184,000

Securities (5 People):

Works per day = 24 Hours

1 Week = 7 Days of work = 168 Hours

1Year = 168* 52 = 8736 Hours

Cost per Person = $15

Total Cost per Year for 1 Security Guard = $131,040

Total Cost per Year for 5 Security Guards =$655,200

Raw Materials

Aluminium:

Consumption per Month = 40 Ton

Consumption per year = 120 Ton

Cost per unit = $1800

Total Cost per Year = $864,000

Steel:

8

Consumption per Month = 100 Ton

Consumption per year = 120 Ton

Cost per unit = $480

Total Cost per Year = $576,000

Nylons:

Consumption per Month = 5000 kg

Consumption per year = 60000 kg

Cost per unit = $3.5

Total Cost per Year = $210,000

Nitrogen:

Consumption per Month = 4000 Lt

Consumption per year = 48000 Lt

Cost per unit = $10

Total Cost per Year = $480,000

Polyesters:

Consumption per Month = 5 Ton

Consumption per year = 60 Ton

Cost per unit = $470

Total Cost per Year = $28,200

9

Miscellaneous

Maintenance:

Consumption per year = 5 machine

Cost per unit = $20000

Total Cost per Year = $100000

Fuel of Transportations:

Total Cost per Year =$30000

Escalations =1.5%

Annual Cost per Year = $8,904,962

Revenue

Marginal Cost

Marginal Revenue

Expected Revenue Product

Airframe Barrier Nets/net $700 $1,500 $1,200,000 800Seatbelt Airbags/seat $350 $800 $4,800,000 6000Child Aviation Restraints

System- CARES $250 $800 $1,800,000 2250Crew Restraints $200 $500 $2,000,000 4000Lightweight Seatbelt $300 $700 $2,800,000 4000Commercial Passenger

Restraint $200 $600 $4,200,000 7000Business Jet Restraint $400 $800 $6,000,000 7500Rotorcraft Jet Restraint $300 $600 $2,400,000 4000Ground Vehicle Restraint $250 $500 $2,200,000 4400Interior Products Baby Bassinet $600 $1,000 $500,000 500Child Seats $700 $1,200 $1,200,000 1000

Total Revenue per Year: $29,700,000

10

Cash flow

11

Present Worth of CostsAnnual Cost of Raw materials = Annual cost of [Aluminium + Steel + Nylon + Nitrogen + Polyesters]

= $864,000 + $576,000 + $210,000 + $480,000 + $28,200

= $2,158,200

MARR = 20%

Inflation = 1.5%

MARR f =i +f +if

= 20 + 1.5 + .3

= 21.8%

Present worth of Raw materials = $2,158,200 (P/A, 21.8%, 20)

= $2,158,200(4.4983)

= $9,708,231.06

Annual Cost of Utilities = Annual cost of [Electricity + Water]

= $315,360 + $14,602

= $329,962

MARR = 20%

Inflation = 5%

MARR f = i +f +if

= 20 + 5 + 1

= 26%

Present worth of Utilities = $329,962 (P/A, 26%, 20)

= $329,962(3.8083)

= $1,256,608.49

Annual Operational Costs = Annual cost of [Scientists, Engineers, Workers, Security]

= $1,950,000 + $2,184,000 + $1,497,600 + $655,200

= $6,286,800

MARR = 20%

12

Inflation = 0.5%

MARR f = i +f +if

= 20 + 0.5 +0.1

= 20.6%

Present worth of Operational Costs = $6,286,800 (P/A, 20.6%, 20)

= $6,286,800(4.8544)

= $30,518,641.92

Annual Miscellaneous Costs = Annual cost of [Machine maintenance, Transportation]

= $100,000 + $30,000

= $130,000

MARR = 20%

Inflation = 1.5%

MARR f = i +f +if

= 20 + 1.5 +0.3

= 21.8%

Present worth of Miscellaneous Costs = $130,000 (P/A, 21.8%, 20)

= $130,000(4.4983)

= $584,779

Present Worth of Total Costs = $80,000,000+ $9,708,231.06 + $1,256,608.49 + $30,518,641.92 + $584,779

= $122,068,260.50

13

Present Worth of RevenuesAnnual Revenue from all the products = $29,700,000

MARR = 20%

Inflation = 1.5%

MARR f = i +f +if

= 20 + 1.5 +0.3

= 21.8%

Present worth of Revenues = $29,700,000 (P/A, 21.8%, 20)

= $29,700,000(4.4983)

= $133,599,510

Net Present worthNet Present Worth = Present Worth of Revenues - Present Worth of Costs

= $133,599,510 - $122,068,260.50

= $11,531,249.50

14

ConclusionSo, after doing the analysis, we come to a conclusion that they should do this investment on making a new company. This statement also being strongly supported by the positive result of the net present worth. This positive result means that the project is acceptable and if they do this project, hopefully they will success and get good profits.