Furniture Investment Plan-010615

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INVESTMENT PLAN FOR

FURNITURE

First edition
09/07/2022
The main purpose of this report is estimating financial index of production and sale of furniture
in Italy and Iran. Different types of costs and revenues are anticipated in next 10 years.
Furthermore, financial index like initial rate of return (IRR), net present value (NPV) and … are
calculated. This business consists of four different parts:
1. Design center which models furniture in Italy
2. Factory which produces different types of furniture in Italy
3. furnishing company which equip luxury residential projects in Iran
4. Additional costs
Each part of business is examined separately and at the end, cashflows are combined. Detail of
calculations are written below.
1. Design Center
Design center is located in Italy. It designs and models furniture and sells them to furniture
factories.
1.1. Costs
Costs of design center is separated in two categories:
 Office rent
 Employee wages
1.1.1. Office rent
An office should be rented in Italy and another one in Tehran. Cost of office rent is written in
table below.
Table 1-detail of office rent for design center
NO Description Unit Amount
1 Milan office rent Euro 5,000
2 Tehran office rent Euro 1,000
3 monthly rent Euro 6,000
4 annual rent Euro 72,000
1.1.2. Wage
Number of employees and their wages are shown in table below.
Table 2- detail of employee and wages for design center
Title Number Salary Additional costs Sum
Chief design officer 1 5000 50% 7500
Art manager 1 4250 50% 6375
Designer (Tehran office) 5 400 30% 2600
Monthly wage 7 16475
Annual salary 197,700

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1.2. Revenue
In each year design center will sell some of it’s sketches to furniture factories. Main client is the
factory that we mentioned in the introduction and some of sketches will be sold to the others.
Number of sold sketches and their price in each year is shown in table below:
Table 3- revenue of design center
Yea number of sold number of sold each sketch price Sum
r sketch to factory sketch to others (Euro) (Euro)
1 3 3 12,000 72,000
2 5 5 15,000 150,000
3 5 5 15,000 150,000
4 7 7 20,000 280,000
5 7 7 20,000 280,000
6 7 7 20,000 280,000
7 7 7 20,000 280,000
8 7 7 20,000 280,000
9 7 7 20,000 280,000
10 7 7 20,000 280,000
1.3. Cashflow
Table 4-design center cashflow (Euro)
Year cost revenue cashflow
1 (269,700) 72,000 (197,700)
2 (269,700) 150,000 (119,700)
3 (269,700) 150,000 (119,700)
4 (269,700) 280,000 10,300
5 (269,700) 280,000 10,300
6 (269,700) 280,000 10,300
7 (269,700) 280,000 10,300
8 (269,700) 280,000 10,300
9 (269,700) 280,000 10,300
10 (269,700) 280,000 10,300
(2,697,000
Sum 2,332,000 (365,000)
)
1.4. Tax
Cumulative cashflow of design center is minus within next 10 years. Hence tax for this part of
business will be zero.
Year cash flows Cumulative
1 (197,700) (197,700)
2 (119,700) (317,400)
3 (119,700) (437,100)
4 10,300 (426,800)
5 10,300 (416,500)
6 10,300 (406,200)
7 10,300 (395,900)
8 10,300 (385,600)
9 10,300 (375,300)

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10 10,300 (365,000)

2. Factory
The furniture factory is located in Italy. The variables for costs and revenue of the factory are
shown in the following:
2.1. Cost
Costs of furniture factory divided into 6 categories:
1- fixed investment
2- additional costs (maintenance, utilities, …)
3- advertising
4- wage
5- cost of sketch
6- cost of goods
2.1.1. Fixed investment
For purchasing factory include buildings, machinery and etc, 3 million Euros should be paid.
2.1.2. Additional costs
Additional costs include maitenence, utilities and etc is 20,000 Euros each for each month
(240,000 Euros per year).
2.1.3. Advertising
Cost of advertising for each year is near 250,000 Euros.
2.1.4. Wage
Number of employees and their wages are shown in table below.
Table 5- detail of employee and wages for the furniture factory
Title Number Salary Additional costs Sum
Manager 1 4000 50% 6000
Labor 8 2000 50% 24000
Monthly wage 9 30000
Annual salary 360,000

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2.1.5. Cost of sketches
In previous section for design office its been told that design office sell sketches to furniture
company. This part of cost is shown in table below.
Table 6-cost of sketches for factory (Euro)
year cost of sketch
1 (36,000)
2 (75,000)
3 (75,000)
4 (140,000)
5 (140,000)
6 (140,000)
7 (140,000)
8 (140,000)
9 (140,000)
10 (140,000)

2.1.6. Cost of goods


Cost of goods has direct relation with production volume. Ratio of this cost to revenue is 70
percent. Maximum revenue from factory is 8 million euros but after 5 years it will arrive to
maximum capacity. Cost of goods is calculated in table below:
Table 7-cost of goods for factory (Euro)
year capacity cost of goods
1 20% (1,120,000)
2 30% (1,680,000)
3 50% (2,800,000)
4 70% (3,920,000)
5 90% (5,040,000)
6 100% (5,600,000)
7 100% (5,600,000)
8 100% (5,600,000)
9 100% (5,600,000)
10 100% (5,600,000)

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2.1.7. Total cost

Table 8-total cost of furniture factory (Euro)


fixed additional cost of cost of
year advertising wage total
investment costs sketch goods
1 (3,000,000) (240,000) (250,000) (360,000) (36,000) (1,120,000) (5,006,000)
2 - (240,000) (250,000) (360,000) (75,000) (1,680,000) (2,605,000)
3 - (240,000) (250,000) (360,000) (75,000) (2,800,000) (3,725,000)
4 - (240,000) (250,000) (360,000) (140,000) (3,920,000) (4,910,000)
5 - (240,000) (250,000) (360,000) (140,000) (5,040,000) (6,030,000)
6 - (240,000) (250,000) (360,000) (140,000) (5,600,000) (6,590,000)
7 - (240,000) (250,000) (360,000) (140,000) (5,600,000) (6,590,000)
8 - (240,000) (250,000) (360,000) (140,000) (5,600,000) (6,590,000)
9 - (240,000) (250,000) (360,000) (140,000) (5,600,000) (6,590,000)
10 - (240,000) (250,000) (360,000) (140,000) (5,600,000) (6,590,000)
2.2. Revenue
Maximum revenue from factory is 8 million euros but after 5 years it will arrive to maximum
capacity. Revenue of the factory is calculated in the following.
Table 9-revenue of the factory (Euro)
year capacity revenue
1 20% 1,600,000
2 30% 2,400,000
3 50% 4,000,000
4 70% 5,600,000
5 90% 7,200,000
6 100% 8,000,000
7 100% 8,000,000
8 100% 8,000,000
9 100% 8,000,000
10 100% 8,000,000
2.3. Cash flow before tax
Table 10-furniture factory cash flow before tax (Euro)
year cost revenue cash flow
1 (5,006,000) 1,600,000 (3,406,000)
2 (2,605,000) 2,400,000 (205,000)
3 (3,725,000) 4,000,000 275,000
4 (4,910,000) 5,600,000 690,000
5 (6,030,000) 7,200,000 1,170,000
6 (6,590,000) 8,000,000 1,410,000
7 (6,590,000) 8,000,000 1,410,000
8 (6,590,000) 8,000,000 1,410,000
9 (6,590,000) 8,000,000 1,410,000
10 (6,590,000) 8,000,000 1,410,000

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2.4. Tax
In Italy tax rate is 29 percent. Every cost except fixed investment is accepted for calculating tax.
Machinery and factory depreciation time is 20 years, hence amortization for each year is 150,000
Euros. tax for the factory is calculated below:
Table 11-tax calculation for the furniture factory (Euros)
cash cash flow for
year cost revenue amortization cumulative Tax
flows tax
1 (2,006,000) 1600000 (406,000) (150,000) (556,000) (556,000) -
2 (2,605,000) 2400000 (205,000) (150,000) (355,000) (911,000) -
3 (3,725,000) 4000000 275,000 (150,000) 125,000 (786,000) -
4 (4,910,000) 5600000 690,000 (150,000) 540,000 (246,000) -
5 (6,030,000) 7200000 1,170,000 (150,000) 1,020,000 774,000 (224,460)
6 (6,590,000) 8000000 1,410,000 (150,000) 1,260,000 2,034,000 (365,400)
7 (6,590,000) 8000000 1,410,000 (150,000) 1,260,000 3,294,000 (365,400)
8 (6,590,000) 8000000 1,410,000 (150,000) 1,260,000 4,554,000 (365,400)
9 (6,590,000) 8000000 1,410,000 (150,000) 1,260,000 5,814,000 (365,400)
10 (6,590,000) 8000000 1,410,000 (150,000) 1,260,000 7,074,000 (365,400)

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3. Furnishing company
Furnishing company located in Tehran and equip luxury residential projects. Aim of this
company is to be official agency for luxury Italian home equipment brands. As a result of
Cooperating with Lotus holding1, furnishing company has access to enough client in the
beginning of this business.
3.1. Cost
Cost of this business is separated into 4 categories:
1- wage & rent
2- deposit
3- advertising
4- cost of goods
3.1.1. wage & rent
annual wage & rent is calculated in the table below.
Table 12-furnishing company employee and wage
title number salary additional costs sum
manager 1 750 30% 975
employee 5 400 30% 2600
janitor 1 300 30% 390
Monthly wage 7 3965
Annual salary 47,580

Table 13-Cost of wage and rent in furnishing company


NO description unit amount
1 Tehran office annual rent euro 24,000
2 Annual salary euro 47,580
3 Annual cost euro 71,580

3.1.2. Deposit
To be the official agency of different brands, company must deposit 5 million Euros. After 3
years company can take it back.

1
One of the main construction companies in luxury segment.

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3.1.3. Cost of goods
Average furnishing revenue from each customer is around 350,000 Euro. 70 percent of this
number is cost of goods that calculated below:
Table 14-cost of goods in furnishing company
number of
year cost of goods
furnished dwelling
1 15 (3,675,000)
2 30 (7,350,000)
3 35 (8,575,000)
4 40 (9,800,000)
5 45 (11,025,000)
6 45 (11,025,000)
7 45 (11,025,000)
8 45 (11,025,000)
9 45 (11,025,000)
10 45 (11,025,000)

3.2. Revenue
Revenue of company is shown in the table below.
Table 15-revenue from furnishing (Euro)
number of
year average price sum
furnished dwelling
1 15 350,000 5,250,000
2 30 350,000 10,500,000
3 35 350,000 12,250,000
4 40 350,000 14,000,000
5 45 350,000 15,750,000
6 45 350,000 15,750,000
7 45 350,000 15,750,000
8 45 350,000 15,750,000
9 45 350,000 15,750,000
10 45 350,000 15,750,000

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3.3. Cash flow before tax
Table 16-cash flow before tax for furnishing company (Euro)
year cost revenue cash flows
1 (8,796,580) 5,250,000 (3,546,580)
2 (7,471,580) 10,500,000 3,028,420
3 (8,696,580) 17,250,000 8,553,420
4 (9,921,580) 14,000,000 4,078,420
5 (11,146,580) 15,750,000 4,603,420
6 (11,146,580) 15,750,000 4,603,420
7 (11,146,580) 15,750,000 4,603,420
8 (11,146,580) 15,750,000 4,603,420
9 (11,146,580) 15,750,000 4,603,420
10 (11,146,580) 15,750,000 4,603,420

3.4. Tax
In Iran tax rate is 25 percent from net income. Every cost except deposit is accepted for
calculating tax.
Table 17-tax of furnishing company (Euro)2
cash flow for
year cost revenue cumulative Tax
tax
1 (3,796,580) 5,250,000 1,453,420 1,453,420 (363,355)
2 (7,471,580) 10,500,000 3,028,420 4,481,840 (757,105)
3 (8,696,580) 12,250,000 3,553,420 8,035,260 (888,355)
4 (9,921,580) 14,000,000 4,078,420 12,113,680 (1,019,605)
5 (11,146,580) 15,750,000 4,603,420 16,717,100 (1,150,855)
6 (11,146,580) 15,750,000 4,603,420 21,320,520 (1,150,855)
7 (11,146,580) 15,750,000 4,603,420 25,923,940 (1,150,855)
8 (11,146,580) 15,750,000 4,603,420 30,527,360 (1,150,855)
9 (11,146,580) 15,750,000 4,603,420 35,130,780 (1,150,855)
10 (11,146,580) 15,750,000 4,603,420 39,734,200 (1,150,855)

2
Because of deposit, revenue in this table and cash flow before tax in 3rd year, is different from each other.

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4. Additional costs
There are some expenses that is necessary for running 3 part of this business together.
Table 18-additional costs
NO description unit amount
1 Frankfurt office annual rent euro 60,000
2 Milan, Tehran and Frankfurt equipment euro 30,000

Table 19-additional costs


NO description unit amount
1 Europe accountant annual salary euro 54,000
2 Frankfurt employee annual salary euro 54,000
3 lawyer cost for a year euro 15,000
4 Tehran accountant annual salary euro 7,600
5 total euro 130,600

Table 20-additional costs (Euro)


year Frankfurt rent equipment employee total
1 (60,000) (30,000) (130,600) (220,600)
2 (60,000) - (130,600) (190,600)
3 (60,000) - (130,600) (190,600)
4 (60,000) - (130,600) (190,600)
5 (60,000) - (130,600) (190,600)
6 (60,000) - (130,600) (190,600)
7 (60,000) - (130,600) (190,600)
8 (60,000) - (130,600) (190,600)
9 (60,000) - (130,600) (190,600)
10 (60,000) - (130,600) (190,600)

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5. Total cash flow
Total cash flow of 4 parts is calculated in the table below. After 10 years, company will be sold
with price to earnings (P/E) 10.
Table 21-total cash flow (Euro)
company
year cost revenue tax cash flow
price
1 (14,292,880) 6,922,000 (363,355) - (7,734,235)
2 (10,536,880) 13,050,000 (757,105) - 1,756,015
3 (12,881,880) 21,400,000 (888,355) - 7,629,765
4 (15,291,880) 19,880,000 (1,019,605) - 3,568,515
5 (17,636,880) 23,230,000 (1,375,315) - 4,217,805
6 (18,196,880) 24,030,000 (1,516,255) - 4,316,865
7 (18,196,880) 24,030,000 (1,516,255) - 4,316,865
8 (18,196,880) 24,030,000 (1,516,255) - 4,316,865
9 (18,196,880) 24,030,000 (1,516,255) - 4,316,865
10 (18,196,880) 24,030,000 (1,516,255) - 4,316,865
11 - - - 43,168,650 43,168,650
Total (161,624,800) 204,632,000 (11,985,010) 43,168,650 74,190,840

6. Financial index
Due to the financial index result, project is acceptable for investment.
Table 22-financial index (finance rate and reinvestment rate is 8 and 3 percent)
number description unit amount
1 IRR - 55%
2 MIRR - 28%
3 NPV million Euros 39.03

Liquidity needs to run business is 9.5 million Euros:


1-250 thousand Euros for design center
2- 4 million Euros for factory
3- 5 million Euros for furnishing company (deposit)
4- 200 thousand Euros for additional cost

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