DIANACOFFEE SHOP

P.O BOX 98-50200

BUNGOMA
BUSINESS PLAN
PRESENTED BY : DIANA ADHIAMBO

INDEX NO : 5031110989

COURSE CODE : 1819/205

CENTER CODE :503111

SUPERVISOR : MADAM SALOME

INSTITUTION : KITALE NATIONAL POLYTECHNIC

PRESENTED TO : KENYA NATIONAL EXAMINATION

COUNCIL IN PARTIAL FULFILMENT FOR THE AWARD
OF CERTIFICATE IN CATERING AND ACCOMODATION

EXAM SERIES: JUNE/JULY 2022

1
DECLARATION
I declare that this is my original work and has never been presented to any examination board
before.

STUDENT

Signature……………………………………………………………..

Date…………………………………………………………….

SUPERVISOR

Signature……………………………………………………………..

Date…………………………………………………………….

i
DEDICATION
I would like to dedicate the entire business plan to entire family

ii
ACKNOWLEDGEMENT
I thank the almighty God for the guidance, health and ability which have actually helped me my
appreciation goes to my lovely parents for their financial support my special thanks goes to
supervisor who assisted me in guidance while writing this plan. Also my sincere gratitude goes
to my classmates and friends for their moral support and motivation during the time of compiling
this business plan.
Contents
DECLARATION...............................................................................................................................................i
DEDICATION.................................................................................................................................................ii
ACKNOWLEDGEMENT.................................................................................................................................iii
EXECUTIVE SUMMARY................................................................................................................................vi
CHAPTER 1...................................................................................................................................................1
1.0. Business Description.............................................................................................................................1
1.1. Business Name.................................................................................................................................1
1.2. Business location and address.........................................................................................................1
1.3. Form of business..............................................................................................................................1
1.4. Types of business.............................................................................................................................2
1.5. Justification opportunities...............................................................................................................2
1.6. Industry............................................................................................................................................2
1.7. Entry and growth strategy...............................................................................................................2
1.7.0. Entry strategy....................................................................................................................................2
1.8 Goals of the business.............................................................................................................................3
1.8.1. Short term goals................................................................................................................................3
1.8.2. Long term goals.................................................................................................................................3
CHAPTER TWO.............................................................................................................................................4
2.0. MARKET PLAN.......................................................................................................................................4
2.1. MARKET/ CUSTOMERS...................................................................................................................4
2.3. POTENTIAL CUSTOMERS.......................................................................................................................4
2.4. MARKET SHARE...............................................................................................................................4
2.5. COMPETATION.....................................................................................................................................6
2.6. METHODS OF PROMOTION AND ADVERTISMENT................................................................................6
2.7. PRICING SRATEGY.................................................................................................................................7
2.8 SALES TACTICS/SRATEGIES....................................................................................................................7
3.1 KEY MANAGEMENT PERSONEL........................................................................................................9

iv
3.1.1 GENERAL MANAGER....................................................................................................................9
3.1.2 CASHIER......................................................................................................................................9
3.2 RECRUITMENT, TRAINING AND PROMOTION................................................................................10
3.3 RENUMERATION AND INCENTIVE..................................................................................................10
3.3.1 LICENSE PERMIT AND BY LAWS.................................................................................................11
3.5 SUPPORT SERVICE..........................................................................................................................11
3.5.1. Banking service................................................................................................................................12
3.5.2. Insurance firms................................................................................................................................12
3.5.3. Telephone services..........................................................................................................................12
CHAPTER FOUR..........................................................................................................................................13
4.0 OPERATION/PRODUCTION PLAN..................................................................................................13
4.1 PRODUCTION FACILITIES AND CAPACITY.......................................................................................13
4.1.1 ENTERPRISE LAYOUT.................................................................................................................14
4.2 PRODUCTION STRATEGY................................................................................................................14
4.2.1 PRODUCT DESIGN AND DEVELOPMENT.....................................................................................15
4.2.2 MONTHLY MATERIAL REQUIRMENT..........................................................................................15
4.3 PRODUCTION PROCESS..................................................................................................................15
4.4 REGULATION AFFECTING OPERATION..........................................................................................16
CHAPTER FIVE............................................................................................................................................17
5.0 FINANCIAL PLAN............................................................................................................................17
5.1 PRE OPERATIONAL COST................................................................................................................17
5.2 ESTIMATED WORKING CAPITAL....................................................................................................17
ASSETS.......................................................................................................................................................17
5.5 PROFORMA BALANCE SHEET.........................................................................................................20
5.6 BREAK EVEN LEVEL ANALYSIS.......................................................................................................21
5.7 PROFITABILITY RATION..................................................................................................................22
5.8 DESIRED FINANCE..........................................................................................................................23
5.9 PROPOSED CAPITALIZATION..........................................................................................................23
EXECUTIVE SUMMARY
Business description

The name of the business will be Diana coffee shop. The name Diana inspires me a lot that’s
why I decided to use it while coffee shop is the business itself. The business that am going to
start will be coming to achieve certain goals in life such as self-employment. The location of the
business is reached since its within the town and products will be sold at affordable prices. Will
have a chance to employ someone else who will assist in the growth of the business.

Marketing plan

Refers to system designed to plan promote and distribute good and services to the customers it is
the act which involves buying and selling goods and services, am going to locate my business
near several hall what by the use of coffee as the first customers. It will be sold at fair prices to
attract more customers and for the research of compiling with the surrounded competitors.

Management plan

The business will be carried out by employees to take out various management and subordinate
positions available in the business. This will be done by the enterprise that will be the overall
managers of the business. The salary range will be increased according to the work performance
of the employees of the profit increase the more the business will expand and due to that the
salary will be increased

Product plan

For a business to be successful certain proper production strategies must be laid down in order to
have an effective process in production. This satisfying customers. I will provide for them free
means of transportation. Those within the town will have their items delivered for free while

vi
those living a distance away be will be paying at relatively lower charges. By so doing I will
attract more customers around the area and beyond thus the expansion of my business.

Financial plan

In financial planning one should be able to know the financial needs of the business e.g the
starting capital and the market products, its customers services and financially know the profit
income of the business. My initial cost will be 40000 from my personal savings and it will be
added with the contribution of family and friends
viii
CHAPTER 1

1.0. Business Description

My business will be dealing with high- quality coffee beverage, coffee beans and will also be
offering conference services to my loyal customer.

1.1. Business Name

The name of my business will be Diana coffee shop, the name Diana inspires me a lot that’s
why I chosen to use it and the word coffee shop is now the business itself.

1.2. Business location and address

The business will be located within kitale town. The exact position will be opposite kitale
club along kitale Eldoret road

Diana coffee shop,

P.O Box 254

Kitale

email: Diana coffeeshop@gmail.com

1.3. Form of business

The form of business ownership will be sole proprietorship that is one person business.

This is because it has many advantages, the business will expand very fast in that the profit
belongs to me unlike partnership where profits are shared to partners in accordance to the ratio of
contribution. Decision making will be also very easy to be consulted for a decision to be made

The secrete of my business will also be maintained as there will be no other person who will leak
my confidential information since am going to be my own boss and that’s what inspired me to
think of coming up with such a business

1
1.4. Types of business
The type of business will be service and selling of products, the business will be offering
conference services , selling of coffee beverage drink and coffee beans.

1.5. Justification opportunities

The business will be located near kitale town where many people and student from st Antony
boys high school and other colleges and universities around will be my target customers.

My products and services will be affordable to all loyal customers, the place of business will
be accessible and many people will be able to reach the place that is because of God
infrastructure available in the zone.

1.6. Industry
The type of business falls under service and product provision, the size industry business will
be medium size and it will employ professionals who are trained to met the needs of my
business and customers. The amount of capital required will be large in order to enable the
business meet installation cost. There are a few competitors in the area but from my research
I found out that there services and products are of low quality and so I aim at winning most
customers available.

The business will grow very fast since I am going to offer high quality goods and services
that are affordable.

1.7. Entry and growth strategy

1.7.0. Entry strategy

Hope Coffee Shop Will offer high quality coffee to customers and also provide classic
conference services to my customers since the existing business does not offer better services
to its customers just because of unqualified workers, I came up with my business with
qualified personnel to counter this

2
1.8 Goals of the business
The business will have many goals to discover among them are short and long term goals

1.8.1. Short term goals

Target of any business is to gain profit for the proposed business will ascent to earn for
profit for expansion and for expansion will need to create employment of qualified
personnel produce quality

1.8.2. Long term goals

After a successful operation will try its best to have more employees and have its
branches in other towns after a critical study I made and decision made.
CHAPTER TWO

2.0. MARKET PLAN

This is a layout that involves all activities aimed at directing the services to the desired customers
competition, market share and methods of promotion, advertisement sales and strategies and
tactics for marketing the business run smoothly.

2.1. MARKET/ CUSTOMERS

The customers of the business are mainly from the area around kitale town areas and also
the schools and the institutions around it like st Antony, and colleges.. Thereafter boosting
the profit of the business. Beside that there are also customers who buy the product for
their personal uses.

2.3. POTENTIAL CUSTOMERS

The largest will be individual residing in kimilili and within kimilili center. It will
incorporate institutional, private and government organization like kimilili boys high
school. The coffee drinks will also be sold at whole sale price to attract customers who
buy more products to be consumed at their place.

2.4. MARKET SHARE

The size of the market is determined by the population around the market. When the population
is low the market would be small while when the population is high the probability of getting
more and new customers is high.

4
 Due to the competitors or business which sells the similar product as the business for example
the market where there are three similar business which sells the same products as A,B and C
then :
BUSINESSES Kitale coffee Diana coffee shop Classic coffee bar TOTAL

PROFITS 30000 60000 40000 130000

PERCENTAGE SHARE 30000/130000X100 60000/130000X100 40000/130000X100

CALCULATION

PERCENTAGE SHARE 23.08% 46.15% 30.77%

When representing the shares in the pie chart.

PERCENTAGE
Kitale coffee Diana coffee shop
Classic coffee bar

23%
31%

46%
2.5. COMPETATION
The business in the market is unique but some little competition for the already existing related
business from the estate and other major towns. They include the Kitale coffee

And Classic coffee bar

These business are selling similar products like the one am selling and there are also in the same
town with my business. These competitors has got there weakness and strength as follows.
COMPETITORS WEAKNESS STRENGTH
1. Kitale coffee  Poor management.  Large numbers of shops
 High pricing.  Financial stable
 Insecurity  Skilled personnel
2. Classic coffee bar.  Unqualified staff  Good pricing strategy
 Poor location  They offer quality
 No space far from the product
market  Has customer
2. Diana coffee shop  Inadequate space for  Skilled personnel
expansion  Modernized technology
 New in market  Near to the market
 Lack of labor  Good roads for
transport

2.6. METHODS OF PROMOTION AND ADVERTISMENT

The method of promotion and advertisement it’s to be done through posters.

The advertisement through newspaper, magazines its to be done once per week mainly in the
Saturday for most people will have time to pass through the papers for its a holiday. The cost is
to be 250 for both the magazine and newspapers. The advertisement in the TV and radios it’s to
be done daily and its to be cost 1000 per year
The effectiveness of the advertisement its to be seen when new customers stating to buy the
product. There is to be campaigns on the new products where the product is to be shown to the

6
customers and also offering them free in cheap prices when they buy and also offering them
free t-shirts and caps of the business logo.

2.7. PRICING SRATEGY

The proposed business is to provide fixed prices for the its commodity which its to be less than
that of the competitors and its to be influenced by the cost of the of the product from industry.
The business it is to offer credit to loyal customers and those whom they are known and the
customers would have to pay there credit after 4 weeks. The business is to offer discounts to
customers who buys in large quantities or those who buys promptly and also the business is to
offer after sells services like a warrant of one year and also transportation if the customers buys
in large quantities.

2.8 SALES TACTICS/SRATEGIES

The proposed business its to use direct selling to the customers for it has many branches
countrywide like in Eldoret, Kitale and this is to bring direct contact with the customers so that
they can complain or appreciate our services and this is to help the business to identify its
strength and weakness so that it work on it to improve the products and the services offered.
 CHAPTER THREE

3.0 ORGANIZATION AND MANAGEMENT PLAN

ORGANIZATION STRUCTURE

GENERAL MANAGER

Chef Cashier

Waiter

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3.1 KEY MANAGEMENT PERSONEL

3.1.1 GENERAL MANAGER

3. He/she is the owner of the business and is responsible for all managerial duties and
responsibilities and shall be the general manager and director of the hospitality
department.
QUALIFICATIONS
1. Diploma holder in food and beverage management
2. Profession trained as manager /entrepreneur.
3. Should be able to speak fluent English and Kiswahili
4. Five year of experience as supervisor
5. Computer literate
DUTIES AND REPONSIBILITIES
1. Recruit staff.
2. Supervise business transaction
3. Chief decision maker
4. Evaluations of staff.
5. Remuneration of staff
6. Carry out short and long term plan of the business

3.1.2 CASHIER
QUALIFICATION
1. Have diploma in accountancy and record keeping
2. Have team work skills
3. Have experience of not less than one year
4. Aged between 20 to 45
DUTIES AND RESPONSIBILITIES
Manage all accounts duties
Keep and manage all records in the business
 3.2 RECRUITMENT, TRAINING AND PROMOTION
3.2.1 RECRUITMENT
Recruitment will be done locally basing on the performance contract if not through
advertisement over the posters. The poster will indicate the qualifications required. Registration
fee Ksh.1000 nonrefundable for interviews.
Handwritten application with a curriculum vitae accompanied by relevant certificate. Interview
will be through observation of relevant document of interviews and who will have qualified will
be given the rules and regulation that will govern them on employment. The very best will be
given will be picked and every condition to oriented with concern personnel.

3.2.2. TRAINING
The enterprise will offer job training by attending seminars and also through attending the annual
agricultural shows. This will ensure that the farm employs modern farming methods to the best
competition.

3.2.3 PROMOTION OF EMPLOYEES

Promotion will be done on the employees hardworking and experience in that field. It will be
based on individual extra effort, the ability to work behavior and way of conduct of employees.
Promotion will be done when the business has progressed significantly to height and
performance.

3.3 RENUMERATION AND INCENTIVE

The enterprise intends to pay workers their wages and salary depending on the quality services
offered to the business and payment will be done on monthly basis. The salary scale wages for
the proposed business is shown below workers will be compensated according to relation of
employees and employers.

Remuneration and incentive table.

10

JOB TITLE NO OF SALARY HOUSE MEDICAL TOTAL

10
 PERSONNEL (KSH) ALLOWENCE ALLOWENCE

Manager 1 15000 4000 2000 21,000

Cashier 1 12000 2000 1000 15,000
Chef 2 8000 1000 600 9,600
Waiter 2 4000 500 400 4,900
TOTAL 6 39,000 7,500 4,000 50,500

3.3.1 LICENSE PERMIT AND BY LAWS

The enterprise will obtain license and permit from the municipal council with an insurance fee of
Ksh.4000 which will be paid annually to safeguard the farm emergency cases.
Issued a certificate of ownership as sole owner from the registrar of societies of Ksh.1000 (Labor
laws with NSSF office).
It has to liaison with public health act good sanitary and hygiene condition in relation to
ventilation, drainage, toilets, cleanliness and how the products and services are handled.
Has to identify itself with KRA through taxation VAT and PAYE, insurance from Amacco
Insurance Company.

3.5 SUPPORT SERVICE.

We will obtain support service from the following:-
1. The farm will employ an accountant or auditor general to keep track of farms income and
expenditure.
2. The district health supervisor should be consulted in order to produce standard products
3. Banking services will be consulted to serve loans
4. Medical service will be offered to workers
5. Telephone and transport services are virtually important and eventual
6. Need power from KPLC
7. Employ a lawyer to intervene with legal matter
8. The farm will have external security to provide maximum security to the enterprise and to
workers.
9. Farm will acquire financial services from:
 SACCOS
 Co-operative societies
3.5.1. Banking service
Barclays bank eldoret branch
Paying orders
Paying employees
Loans services

3.5.2. Insurance firms

Sanlam
To ensure the business against theft or fire

3.5.3. Telephone services

It will ensure their communication within the business enterprise i.e safaricom and airtel companies

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CHAPTER FOUR

4.0 OPERATION/PRODUCTION PLAN

Consist of both production and marketing of goods and services.

4.1 PRODUCTION FACILITIES AND CAPACITY

The proposed enterprise intends to purchase the following facilities in order to aid the smooth
running of the business.

ITEM QUUANTITY UNIT COST(KSH) TOTAL (KSH)

Refrigerator 1 15000 15000
Computer 1 12000 12000
Cashbook 1 1600 16000
Office furniture 6 600 3600
Wire mesh 1 1000 1000
Feeding trough 2 450 900
trough 4 500 2000
Parties 5 850 4250
Shelves 20 750 15000
Serine 2 70 140
Trays 3 100 300
Fire Extinguisher 1 4000 4000
TOTALS 59,790
4.1.1 ENTERPRISE LAYOUT
The sketch below shows the DIANA ’S COFFEE SHOP enterprise layout

SECURITY MANAGER OFFICE

COUNTER

KITCHEN

ACCONUTANT
STORE

TOILET DISPOSAL PIT

Key:

Entrance

4.2 PRODUCTION STRATEGY

The farm will be getting its material from the dealer and other registered and establishes
enterprise. It shall operate from Monday to Sunday as from 8:00 a.m. to 6:00 a.m. On public
holidays the business will operate from 12:00 p.m. to 6:00 p.m.
The quality products produced will suit all customers’ needs and demand. Customers will deliver
place holder as quickly as possible to avoid less of confidence in the enterprise. It shall ensure a
stock is put in place for future use.

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4.2.1 PRODUCT DESIGN AND DEVELOPMENT
Life Poultry enterprise intends to offer goods and services under the supervision of the manager.
The products produced will be clean up to the standard development of the business growth
which will depend mostly on customer which increase will profit hence expansion of the
business to necessities the dripping of water.
The poultry products such as meat and eggs will be displayed on the customer’s premises in first
identification of goods and services offered in the business. The sells attendant will help
customers who are not decided by advertising for them on the range of products.

4.2.2 MONTHLY MATERIAL REQUIRMENT

ITEMS QUANTITY COST PER @ TOTAL
Curtley 8 20000 160000
Boilers 12 5000 6000
Jikos 2 1000 2000
Thermo flask 2 12000 24000
Heaters 3 10000 30000

4.3 PRODUCTION PROCESS

The business will be concerned with taking tenders from different private and government
institution like schools, colleges etc. The sales man has to include all producers and records
details of the products and activities within the business.

STEP I

Customers will be welcomed to the business premises by the guards and direct them to the
attendant.

STEP II

The customer has to explain his/him needs to the attendant who will attend to them.

STEP III
He/she will be referred to the salesman who will display the goods to the customers and as
choose which kind of products he/she.

STEP IV

He/ she will be talked on friendly manner to make him get attracted and thereafter he is said the
product by supervision of the manager.

4.4 REGULATION AFFECTING OPERATION

These are:

a. Health of the workers and customers safety.

b. Environmental constraints
c. Workers welfare and togetherness.
d. Right of workers

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CHAPTER FIVE

5.0 FINANCIAL PLAN

5.1 PRE OPERATIONAL COST

It consist cost which incurred in establishment of the business price to its operation.

NO. DESCRIPTION COST(KSH)

1 License/permit 2700
2 Machine/Equipment 29000
3 Rent 5000
4 Electricity installation 17000
5 Furniture & Fittings 14000
6 Stationery 3200
7 Advertisement 1500
8 Bank charges 1000
9 Transport 5000
10 Wages/ salaries 47500
11 Insurance 4000
12 Stock of material 20000
13 Postage 150
TOTALS 150,050

5.2 ESTIMATED WORKING CAPITAL

ASSETS
ITEM AMOUNT (KSH)
Cash at hand 150000
Cash at bank 100000
Debtors 20000
TOTALS 450,000
LIABILITIES

ITEM AMOUNT(KSH)
Bank overdraft 30,000
Creditors 60,000
Bank loan 340,000
TOTAL 430,000

Working Capital = Current Asset- Current Liabilities

= 830,000- 430,000

= 400,000

Working Capital of year 2 = 480,000

Working Capital of year 3 = 600,000

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5.3 CASH FLOW FOR YEAR ONE
DESCRIPTION JAN FEB MAR APR MAY JUN JULY AUG SEP OCT NOV DEC TOTALS
CASH IN
FLOW
Cash sales 130,000 140000 160,000 160,000 180,000 180,000 180000 270,000 160,000 150,000 280,000 180,000 2,040,000
Debtors 300,000 140,000 160,000 150,000 120,000 150,000 190,000 150,000 90,000 100,000 1,605,000
Discount 5,000 3,000 2,000 4,000 5,000 4,000 1,000 6,000 4,500 3,000 2,500 40,000
received
TOTAL 435,000 393,000 292,000 269,000 270,000 315,000 374,000 271,000 316,000 244,500 283,000 282,000 3,745,000
INFLOW
CASH OUT
FLOW
Purchases 90,000 100,000 120,000 130,000 100,000 150,000 160,000 130,000 100,000 80,000 90,000 100,000 1,350,000
Electricity bill 1,000 1,000 1,500 1,200 2,000 1,000 1,000 1,000 1,200 1,500 1,000 2,000 26,200
Salaries &wages 122,000 122,000 122,000 122,000 122,000 122,000 122,000 122,000 122,000 122,000 122,000 122,000 1,464,000
Repair and 5,000 5,000 5,000 5,000 20,000
Maintenance
Creditors 10,000 5,000 3,000 2,000 1,000 2,000 2,000 10,000 26,000
Transport 3,000 2,000 3,000 1,500 3,500 4,000 1,500 3,500 2,000 2,500 4,000 5,000 35,200
Telephone bill 6,000 800 900 600 500 1,200 800 700 900 1,000 3,000 4,000 25,800
Insurance 15,000 15,000 15,000 15,000 60,000
Advertisement 1,000 1,500 3,000 1,500 3,000 500 2,000 1,000 900 500 2,000 16,900
License and 40,000 40,000
Permit
Loan repayment 10,000 10,000 60,000 8,000 6,000 4,000 44,000
TOTAL CASH 303,000 232,300 268,000 268,000 231,000 283,000 298,000 267,000 238,900 224,900 238,500 254,000 3,376,600
OUT FLOW
SURPLUS/ 132,000 160,700 42,000 1,000 39,000 32,000 76,000 4,000 77,100 19,600 54,500 30,500 668,400
DEFICIT
ACCUMULATE 132,000 292,000 334,700 335,700 374,700 406,700 482,700 486,700 563,800 583,400 637,900 668,400
D
CASH
5.5 PROFORMA BALANCE SHEET
DESCRITION YEAR 1 YEAR 2 YEAR 3
FIXED ASSET
Machinery & Equipment 29,000 32,400 40,000
Furniture & Fittings 14,000 17,820 20,000
TOTAL 43,000 50,230 60,000
Less Depreciation
5% Machinery & 1,450 1,620 2,000
Equipment
5% Furniture & Fittings 700 891 1,000
Total Depreciation 2,150 2,511 3,000
Net fixed asset 40,850 47,709 37,000
CURRENT ASSET
Cash at hand 300,000 400,000 450,000
Cash at bank 500,000 700,000 780,000
Debtors 30,000 40,000 50,000
Total Current Asset 830,000 1,140,000 1,280,000
TOTAL ASSET 870,850 1,187,709 1,337,000
CURRENT
LIABILITIES
Creditors 60,000 60,800 120,000
Bank Overdraft 30,000 50,000 70,000
TOTAL 90,000 110,800 190,000
Long Term Liabilities
Bank loan 340,000 400,000 550,000
Owners’ Equity 180,600 930,450 995,200
TOTAL LIABILITIES 520,600 1,330,450 1,545,200

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5.6 BREAK EVEN LEVEL ANALYSIS
DESCRIPTION AMOUNT (KSH)
Sales 1,500,000/=
Electricity 5,160/=
Postage 170/=
Advertisement 6,000/=
Repair & maintenance 4,100/=
Transport 24,000/=
Water 1,440/=
Telephone 1,920/=
Purchase 90,500/=
Contribution 1,366,710/=

(a) Contribution = Total Sale- Total Variable Cost

(i) Contribution Margin= 1,366,710 x 100%

1,500,000

= 91%

FIXED COST AMOUNT (KSH)

Salaries 570,000/=
Rent 24,000/=
Insurance 2,760/=
Loan repayment 60,000/=
License/permit 28,080/=
Interest on Loan 4,080/=
TOTAL FIXED ASSET 688,920/=

(ii) Break Even Level of Sales = Fixed Cost x 100%

 Contribution Margin

= 688,920 x 100%
91

=Ksh.757, 054.95

5.7 PROFITABILITY RATION

(a) Gross Profit Margin = (Gross Profit x 100%)
Sales

Year 1 = 1,159,475 x 100%

1,500,000
=77%

Year 2 =1,309,612 x 100%

1,690,000
=77%

Year 3 =1,501,880x100%
1,980,600
=76%

(b) Return on Equity= (Net profit after tax x 100%)

Equity Contribution

Year 1 =283,811.40 x 100%

180,600

=157%

Year 2 =382,823 x 100%

930,450
Year 3 =509,521.60 x 100%

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 995,200
=51%

(c) Return on Investment = Net Profit after Tax + Interest Loan x 100%
Total Investment

Year 1 = (283,811.40 + 4,080)100%

870,850

=33%

Year 2 = (509,521.60 + 4,092)100%

1,187,709

=33%

Year 3 = (509,521.60 + 4,092)100%

1,337,000

=38%

5.8 DESIRED FINANCE

ITEM AMOUNT (KSH)
Pre- operational Cost 393,000/=
Working Capital 2,800,000/=
Desired Financing 3,193,000/=

5.9 PROPOSED CAPITALIZATION

ITEM AMOUNT (KSH)
Owner equity 100,000
Loan from bank 300,000
Total Investment 400,000

24