Aunty May has taken a loan from the bank to start a new business, Singapore

Question 1

Q4.01 Aunty May

Aunty May has taken a loan from the bank to start a new business. She expects a first year revenue of $50,000 and, thereafter, revenue growing at 8% per year. Her non-loan expenses are initially $30,000 per year and this grows at 4% per year. Her loan repayment is $25,000 per year for 5 years.

1. Construct a spreadsheet model to examine Aunty May’s business financials.
2. Is the business viable within the first 8 years? When does it break even?
3. Do you think the loan amount is sufficient for overcoming cashflow concerns? How do you know?
4. What if the first-year revenue is $45,000, growing at 7%; first-year expense is $25,000, growing at 3%; and loan repayment is $20,000 per year for 5 years?