Economic Analysis of a New Business

Vanadium Inc.
The idea is to develop a small scale company for electronic design and industrial level PCB development and manufacturing. This company not only takes manufacturing jobs but also has develops its own products. In the beginning these products consist of a family of FPGA development boards aimed at professional and enthusiasts all over the world. Its like the Arduino family but for FPGAs. Following is the economic analysis:

FIXED COSTS:
Natural
An office with an attached warehouse is the establishment suited for Vanadium Inc. Situated in I9 Industrial Area Islamabad.
Land in I9 Industrial Area: 8000000/-

Physical
This includes all the cost required for the whole setup on the land purchased. Its further divided as follows

Infrastructure:
Construction Material: Office + Warehouse: 2000000/Air Conditioning: 150000/Networking: 150000/Generators: 500000/Office Furniture: 150000/-

Equipment: CircuitBoardPlotters:
116432 101097 109039 101473 102368 113495 LPKF ProtoMat C20/S Quick change Machine Hood (small model) Dust extraction system AutoSwitch automatic dust extraction control Set of Accessories for LPKF ProtoMat C20/S - 1/8" Small Hand Microscope, magnification factor 60 1200000/306000/10050/22500/78000/37500/-

ThroughHoleTechnology:
114662 LPKF MiniContac S 547500/-

MultilayerTechnology:
106328 107050 104863 115326 115327 LPKF MultiPress II Special-design table for MultiPress II Compressor incl. 50 l container 4-layer Multilayer Set 6-layer Multilayer Set 1665000/222000/175500/91350/121500/-

4x15000/Workbenches: Toolsets: Stanley 50000/-

Test Equipment:
Fluke Multimeter 170 Series: Agilent Oscilloscope: InfiniiVision 4000 X-Series Hp Distortion Analyzer 334a: 5x 50000/2x 120000/90000/-

Workstations and Software Resources:

Dell Alienware Altium Designer Windows 8 Pro 5x 190000/5x 50000/5x 15000/-

Human and Organizational:

Construction Firm for labors, engineers and managers: 1000000/Advertising andRecruitment:50000/ LegalProcessing:50000/

Total Fixed Costs: 9.7m

 RUNNING COSTS:
Natural :
Property Tax: 1000/month Gas: 10000/month Fuel (for Generator):20000/month Water: 500/month

Physical:
Maintenance Cost: 30000/month Electricity Cost: 2000/month Packing Material: 5000/month PCBs: 50000/month Electronic Components: 200000/month Other Associated Raw Material: 50000/month Broadband Fee: 20000/month Domain Name and Hosting (for Company Website and Online Store): 10000/month Insurance: 4000/month

Human and Organizational:

Receptionist and Helpline Operator: 20000/month Accounting and Finance Manager: 70000/month Sales and Marketing Manager: 70000/month Design and Quality Assurance Manager: 70000/month Technical Staff (total): 80000/month Other Staff: 30000/month

Total Running Costs: 712500/-

Expected Income:
Unit Price:
FPGA Development Board: 20000/PCB Manufacturing: 10000/Reverse Engineering and Designing: 30000/Population of PCB: 10000/Testing: 10000/-

No. of Manufacturing Jobs in a Month:

FPGA Development Board: 100 PCB Manufacturing: 30 Reverse Engineering and Designing: 15 Population of PCB: 30 Testing: 20

Total Income: 3250000/month

 Conclusion: Breakeven=4months TotalInvestment=FixedCosts+RunningCosts/month*NoofmonthsbeforeBreakeven TotalInvestment=9.7m+712500*4=12.55m CapitalRequired=12.55m ConsideringthecapitalisacquiredfromBankat20%interest,runningcostisincreasedbyRs161666/tillbreakeven(as theloanhasbeenreturnedbythen).Withloanat20%interest,theanalysisisasfollows.

 Thisshowsthatbreakevenisstillachievedsomewherearound4monthsbuttherunningcostisloweredafter breakeven.