SRS Tech Feasibility Report

FEASIBILITY REPORT OF SRS TECH
SUBMITTED TO:
SIR WASEEM AHMED
SUBMITTED BY:
SABEEN JAVAID (2007-NUST-BIT-147)
SABA MANZOOR (2007-NUST-BIT-90)
RASHID ALI (2007-NUST-BIT-138)
RIZWAN ALI (2007-NUST-BIT-49)
Feasibility Report for SRS Tech Page 1

TABLE OF CONTENT:
Executive Summary
Introduction
1- Market Analysis
1.1 Estimated size of Industry
1.2 Software and Services sector with 41% Growth
1.3 Employment of Professionals by 43% Growth
2- Industry at a Glance
3- Departments
3.1 Prospecting Projects
3.2 Launch of a New Software
4- Market
4.1 Market Segmentation
4.2 Market Analysis
4.3 SWOT Analysis
4.4 Competitive Edge
4.5 Main Objectives
5- Financial Analysis
5.1 Require Assets

5.2 Means of Financing
5.3 Expenses incurred at start of SRS Tech
5.4 Projected Balance Sheet
5.5 Projected Income Statement
• Net Profit Percentage
• Operating Capital
• NOPAT
• ROIC
• Accounting Rate of Return (ARR)
• Pay-Back Period
• Discounted Pay-Back Period
• Net Present Value
• Internal Rate of Return
• Time Value of Money
• Modified Internal Rate of Return
5.6 Ratio Analysis
•Liquidity Ratios
➢Current Ratio
➢Quick Ratio
➢Working Capital
•Profitability Ratios
➢Gross Profit Margin
➢Net Profit Margin
•Debt Management Ratio

➢Debt Ratio
6- References

Executive Summary:
SRS TECH is a start-up organization whose vision is to create the finest
education/entertainment software for non-reading individual with developmental
disabilities. The software product has been designed and created by IT specialists
with vast industrial experience and knowledge, to meet the needs of the targeted
customer segments. The software will be constructive by giving customization to the
product and will be according to client’s choice and requirements. SRS TECH will be
August 2010 as a Customer Oriented IT Platform. Idea founded and owned by
partners Ms. Sabeen, Ms. Saba, Mr. Rashid & Mr. Rizwan.

SRS TECH is a software house which is focusing on Pakistani projects specially
to participate in the development of Pakistan thus enhancing IT value and strength
in the country.
Mission Statement:
To give quality product to the active economy drivers of the market.
Vision:
Focusing on providing quality services to the target market which are playing
important role in country’s economy and progress i-e Business concerns,
manufacturing concerns, banks and educational institutes. Thus we promote
technology within these working concerns which results into their efficient
participation in Pakistan’s economy and progress.
1-Market Analysis:
The Pakistan IT industry today has an impressive story to tell. Much like the
successful startup that one would have not heard of a few years ago but now it is all
of a sudden the talk of the town The Pakistan’s IT industry has started to appear on
the radar of firms like Gartner and IDC and in the reports by AT Kearny and the
World Bank. It is a transformed industry growing exponentially and creating stir.
1.1Estimated Size of IT Industry
From its slow beginnings in the late 1980s, the industry has successfully arrived to a
point where its value proposition has been validated over and over again. The
largest members are grossing 15-25million dollars in revenues, and 100 million
dollar valuations. Most tech companies are growing in excess of 30% a year
annually. The industry as a whole is doing over 2 billion dollars a year in revenue, up
from less than a billion dollars a few years ago.
1.2 Software and Services sector with 41% Growth
For 2007-2008
About half of this growth is coming from foreign, software and high end services
projects. IBM, Cisco and Microsoft are expanding there in Pakistan operations
aggressively while several startups are now backed by VCs such as e-Planet
Ventures, Motorola, and adobe.

1.3 Employment of Professionals by 43% Growth
Sectors and countries have achieved in 15-20years, Pakistan’s technology scene is

poised to achieve this in less than a decade.
Putting it all together, now Pakistani Technology industry is very different from what
it was in the early 1990’s. From 4 founding companies in 1994, PASHA’s
membership exceeds 370. From 4,619full-time employees in 2004, current
employees are 12,232 and still rising day by day.
The number of QA (Quality assurance) professionals has doubled in the last 3 years
and 20% of those employed in the sector are foreign qualified. Fast becoming a hub
of high performance business, the questions that now arise are if this year’s growth
will be 28% or 50%, if there will be enough skilled HR to staff demand, if there will
be enough office space available in next year.
2- Industry at a Glance:

3- Departments:
Our main idea is to open a software house in Islamabad which would be the biggest
software house in Pakistan. We will have mainly two Departments.
Direct Projects:
Projects to create the set of standards and services that

With a policy framework enable us to develop simple,
Directed and easy to use software that are used for
Educational purposes and for meaningful exchange of
Technology skills between Techies and people having
Development disabilities.
Out Sourcing:
Outsourcing is an arrangement in which one company provides services for another

company that could also be or usually have been provided in-house. Outsourcing is a
trend that is becoming more common in information technology and other industries
for services that have usually been regarded as intrinsic to managing a business. In
some cases, the entire information management of a company is outsourced, including
planning and business analysis as well as the installation, management, and servicing
of the network and workstations. Outsourcing can range from the large contract in
which a company like IBM manages IT services for a company like Xerox to the practice
of hiring contractors and temporary office workers on an individual basis. So we will be
providing such kind of services to other institutions as well.
3.1 Prospecting Projects:
➢ Supporting firms
We will support various projects in collaboration with NADRA by using SQL, Oracle.
➢ Database for Institutions
We will be focusing on the projects and solutions for institutions like
Educational, Medical Business Growing Institutes.
3.2 Launch of a New Software:
➢ SRS Tech will launch new software and will introduce a new idea in the history
of Pakistan.
➢ Our software will help disable people. This idea has been taken from the
Research work of Dr. Sue. We were really impressed with his this kind of
thought so we decided to implement his idea.

4- Market:
4.1 Market Segmentation:

SRS Tech has identified four market segments for its product. They are the most
likely consumers of their product. These segments are as follows:
a. IT Intensive Corporate – The corporate and commercial businesses that are

focusing on IT software and are having an IT oriented environment like
banks, manufacturing concerns.
b. Centers of Independent living - They are typically non-profit organizations
that assist individuals with development disabilities. They help their clients
with transition skills, making them more independent. They also provide a
wide range of life skills training for the individuals.
c. Proactive Parents and Educational Concerns – Parents and educational
institutions (like district schools etc) that are really concern in the education
of their kids and students respectively. They will be looking for assistance
that can help them with the learning progress of their kids and student at
home and at educational places respectively.
d. Agencies - Internationally many countries have their agencies that act as
Brokers to connect the service Providers and that individual that are in need
of these services. Such agencies generally formed as a result of a settlement
or payout from a lawsuit (individual and class actions).
4.2 Market Analysis:

4.3 SWOT Analysis:
SWOT analysis is a strategic planning method used to evaluate the Strengths,
Weaknesses, Opportunities, and Threats involved in a project or in a business
venture. It involves specifying the objective of the business venture or project and
identifying the internal and external factors that are favorable and unfavorable to
achieve that objective. We briefly pointed out them as below:
➢ Strengths:
• Highly skilled and focused employees.
• Providing customizable software products.
• Satisfying the requirements of the targeted segments.
• Quality assurance of value added products.
• Giving a new flavor to the software development in Pakistan.
➢ Weaknesses:
• To gain the trust of the people.
• To get our software house to be renowned among the software techies.
• Lack of training in the employees at beginning.
➢ Opportunities:
• To provide a diversified range of products according to customers taste
and demands.
• To implement the knowledge hidden inside “the untapped stockrooms
of our minds” – G.R.Harrison.
• Ensure Individual Integrity.
• Enhance Personal Professional Competence
➢ Threats:
• Terrorists attacks.
• Influence of Economy Impairment.
• Prevailing trends of Globalization.
• Global Economic Crisis.
• Rationalism
4.4 Competitive Edge:

As there are several companies present in the market and are providing similar
product for educational purposes SRS Tech will Leverage its competitive edge by
including Entertainment factor in our software products. By doing so users will
spend more time on using our product as it creates a mean of interest while using
software.
4.5 Main Objectives:

➢ We will follow the strategy of Market Penetration in the first year. Then we will
focus on how to increase our sales up to double or triple of current sales in the
next 2-3 years.
➢ To assist more than 15000 individuals with development disabilities by the end
of 5th year at max.
➢ Achieve up to 20-25% market penetration by the end of 4th year.
Projected sales, gross profit margin and profit for next three years are shown
below:
5- Financial Analysis:
Note: All figures are in (000) Rs
5.1 Require Assets:

Assets
Cash 610
A/C Receivables 500
Inventory 190
Prepaid Rent 600
Bill Boards 100
Total Current Assets 2100
Furniture 755
Fixture 345
Computers 500
Equipment 450
Total Fixed assets 2050
Total Assets 4100
5.2 Means of Financing:
Owner’s Equity:
Partner’s Names Equity in Rupees
Ms. Sabeen Javaid 720
Ms. Saba Manzoor 720
Mr. Rashid Ali 720
Mr. Rizwan Ali 720
Liabilities:
➢ Loan from Bank : 460
➢ Long-term loans : 760

Owner’s equity + Liabilities = Assets
(720 × 4) + (460 + 760) = 4100
4100 = 4100
Therefore Accounting Equation is satisfied.
5.3 Expenses incurred at start of SRS Tech:
Expenses heads Amount in Rs
Legal formalities 100
license 200
Marketing Campaign 300
furniture 700
Fixtures 350
Computers 2500
• Laptops
• SRS’s Main Server
• Network establishment
• H/w & S/w
Equipment 500
• Generator
• Photocopy Machine
• Others like telephone
connections etc.
R & D Fund 2000
Advance Rents 500
Other expenses 240
Total startup expense 7390
Cash in hand required 610
Total 8000
5.4 Projected Balance Sheet:
Projected Balance Sheet

ASSETS
Current Assets
Year 2010 Year 2011 Year 2012 Year 2013
Cash 610 710 850 1000
Inventory 500 550 500 550
A/C Recv 190 165 200 250
Prepaid Rent 600 675 650 600
Bill Boards 200 200 250 200
Total Current Assets

2100 2300 2450 2600
Fixed Assets
Furniture 755 755 855 855
Fixture 345 345 345 345
Computers 500 500 600 650
Equipment 450 450 500 550
Less: Accumulated (100) (100) (100) (100)

Depreciation
Total Fixed assets 2050 2050 2200 2300
Total Assets 4100 4350 4650 4900
LIABILITIES AND CAPITAL
Liabilities
A/C Payable 250 330 300 250
Accrued Expenses 120 290 260 220
Current Borrowing 250 300 400 550
Total Current 620 920 960 1020

liabilities
long term 600 550 810 1000

liabilities

Total Liabilities 1220 1470 1770 2020
Capital Stock
Ms. Sabeen Javaid 720 720 720 720
Ms. Saba Manzoor 720 720 720 720
Mr. Rashid Ali 720 720 720 720
Mr. Rizwan Ali 720 720 720 720
Total Capital 2880 2880 2880 2880
Total Liabilities & 4100 4350 4650 4900

Capital Stock
NOTE: We have ignored retain earnings and dividends.
5.5 Projected Income Statement:
INCOME STATEMENT
Revenue:
Sales Revenues 1500 2000 2600 3700
Service Revenue 700 1000 1200 1300
Total Revenue 2200 3000 3800 5000
Expenses:
Salaries Expense 300 300 300 400
Commissions 20 20 30 20
Office Supplies 90 90 70 80
Legal Fees 70 70 100 70
Advertisement 200 250 200 200
Interest 50.6 50.6 100 100
R&D 50 70 150 100
Other expenses 820 750 1000 1200
Total Expenses: 1600.6 1600.6 1950 2170

Profit or Net Income
599.4 1399.4 1850 2830
Before Income tax
Less Income Tax 59.94 139.94 185 283

10%
Profit or Net- 539.46 1259.46 1665 2547

Income after Tax
Add: Depreciation100 100 100 100
Net Cash flow 639.46 1359.46 1765 2647
• Net Profit Percentage:

All companies must consume resources (i.e. incur costs) in order to generate
revenue. The Net Income Percentage is simply a measure of management’s
ability to control these costs.
Net Profit Percentage = (Net Income / Total Revenue) * 100
For Year 2010:

= (539.46/2200)*100
= 24.52 %
Thus the company will be able to convert 24.52 % of its revenue into net income.
For year 2011:

= (1259.46/3000)*100
= 41.982 %
For year 2012:

= (1665/3800)*100
= 43.82 %
For year 2012:

= (2547/5000)*100

= 50.94 %
Here trend of net profit percentage is shown graphically. That is pretty good,
improving every year.
• Operating Capital:
Total Operating Capital = NOWC + Operating long term assets

= (Cash + A/R +Inventories-(A/P + Accruals))
+Operating long term assets
For year 2010:

Total Operating Capital = (Cash + A/R +Inventories-(A/P + Accruals)) +Operating
long term assets
= 610 + 500 + 190 – 250 – 120 + 2050
= 2980
For year 2011:

long term assets
= 710 + 550 + 165 – 330 – 290 +2050
= 2855
For year 2012:

long term assets
= 850 + 500 +200 – 300 -260 + 2200
= 3190
For year 2013:

long term assets
= 1000 + 550 + 250 – 250 – 220 + 2300
= 3630
Here trend of Operating Capital is shown graphically. That is quite positive.

• NOPAT:
NOPAT = EBIT (1 - T)
Assuming, T = 10%
For year 2010:

= 599.4 (1- 0.10)
=539.46
For year 2011:

= 1399.4 (1- 0.10)
=1259.46
For year 2012:

= 1850 (1- 0.10)
= 1665
For year 2013:

= 2830 (1- 0.10)
= 2547
Here trend of net profit percentage is shown graphically.
• ROIC:
ROIC= [NOPAT/ Operating Capital]*100
Assuming WACC = 10 %
If ROIC > WACC, this means company is adding value & will have positive EVA.
For year 2010:

= [539.46/2980]*100
=18.1 %
Since ROIC > WACC, this means company is adding value & will have
positive EVA.
For year 2011:

= [1259.46/2855]*100
= 44.11 %
positive EVA.
For year 2012:

= [1665/3190]*100
= 52.19 %
positive EVA.
For year 2013:

= [2547/3630]*100
= 70.16 %
positive EVA.
• Accounting Rate of Return (ARR):
ARR
Years Cash Flow Depreciation Profit
0 (4100) 0 0
1 639.46 100 539.46
2 1359.46 100 1259.46
3 1765 100 1665
4 2647 100 2547
Average Profit for 4 years 1502.73

Average Investment (4100+0)/2=2050
ARR (1502.73/2050)*100 =73.3%
• Pay-Back Period:
Pay-Back Period
Year Cash-Flow
0 (4100)
1 639.46 3460.54
2 1359.46 2101.08
3 1765 336.08
4 2647
Payback Period= 3years and ((336.08/2647)*12) months
= 3years and 1month and (0.52*30)days
= 3years and 1month and 16 days
• Discounted Pay-Back Period:
Assuming WACC=10%
Present Value of Cash-Flow = FV (1/(1+.10)n)
Present Value Factor= 1/(1+.10)n , n=0,1,2,3,4.
Discounted Pay-Back Period
Year FV of Cash FlowPV Factor PV of Cash-Flow
0 (4100) 1
1 639.46 0.909 581.27 3518.54
2 1359.46 0.826 1122.91 2395.63
3 1765 0.751 1325.5 1070.13
4 2647 0.683 1807.9
Discounted Payback Period= 3years and ((1070.13/1807.9)*12) months

= 3years and (0.59*30)days
= 3years and 18 days
• Net Present Value:
Net Present Value
0 (4100) 1 (4100)
1 639.46 0.909 581.27
2 1359.46 0.826 1122.91
3 1765 0.751 1325.5
4 2647 0.683 1807.9
NPV = Inflow - Outflow = 737.58
NPV is positive so we will accept this project
• Internal Rate of Return (IRR):
Internal Rate Of Return
Year FV of Cash FlowPV Factor (10%)PV of Cash-FlowPV Factor (20%)
0 (4100) 1 - 4100 1 (4100)
1 639.46 0.909 581.27 0.833 532.67
2 1359.46 0.826 1122.91 0.6944 944
3 1765 0.751 1325.5 0.578 1020.17
4 2647 0.683 1807.9 0.4822 1276.38
NPV = Inflow - Outflow 737.58 -326.78
This means IRR is between 10% & 20% so now we will use interpolation
technique.
IRR= 10% + [(737.58/(737.58-(-326.78)))*(20-10)]
IRR= 16.93 %
• Time Value of Money:
Assuming: Interest rate =10%
Present Value
Present Value of Cash-Flow = FV (1/ (1+.10) n )
Present Value Factor= 1/ (1+.10)n , n=0, 1, 2, 3, 4.
Present Value
0 (4100) 1
1 639.46 0.909 581.27
2 1359.46 0.826 1122.91
3 1765 0.751 1325.5
4 2647 0.683 1807.9
PV of future inflows = 4837.58
Future Value
Future Value of Cash-Flow = PV *(1+.10) n
Where n=0, 1, 2, 3, 4.
Future Value
Year PV of Cash FlowFV Factor FV of Cash-Flow
0 (4100)
1 639.46 1.331 851.121

2 1359.46 1.21 1644.95
3 1765 1.10 1941.5
4 2647 1 2647
FV of inflows = 7084.57
• Modified Internal Rate of Return (MIRR):
We select this project if its MIRR is greater than WACC because greater the
MIRR than WACC, greater will be the security margin.
Future Value
Year PV of Cash FlowFV Factor FV of Cash-Flow
0 (4100)
1 639.46 1.331 851.121
2 1359.46 1.21 1644.95
3 1765 1.10 1941.5
4 2647 1 2647
FV of inflows = 7084.57
Now we will find that discount rate on terminal value (i.e. 7084.57) for
which our answer equals the outflow.
Find i=?
Future Value of Cash-Flow = PV *(1+.10) n
n=0, 1, 2, 3, 4.
7084.57=4100(1+i) 4
MIRR = i = 14.65 %

5.6 Ratio Analysis:
1. Liquidity Ratios:
Liquidity measures a company's capacity to pay its debts as they come
due. There are three ratios for evaluating liquidity.
a. Current Ratio:
The current ratio gauges how capable a business is in paying current
liabilities by using current assets only.
Current Ratio = CA / CL
Ideally it should be 2:1
For year 2010:

= 2100 / 620
= 3.38 times
For year 2011:
= 2300/ 920
= 2.5 times
For year 2012:
= 2450 / 960
= 2.55 times
For year 2013:
= 2600 / 1020
= 2.54 times
Here we have shown the trend of Current Ratio graphically:
b. Quick Ratio:
It indicates the extent to which you could pay current liabilities without
relying on the sale of inventory.
Quick Ratio = Quick Assets / CL
= (CA – Inventory – Prepayments) / CL
Ideally it should be > 1.
For year 2010:

Quick Ratio = (CA – Inventory – Prepayments) / CL
= (2100-500-600) / 620
= 1.61 times
For year 2011:
= (2300 – 550 - 675) / 920
= 1.19 times
For year 2012:

= (2450 – 500 – 650) / 960
= 1.35 times
For year 2013:

= (2600 – 550 – 600) / 1020
= 1.42 times
Trend of quick ratio is shown below:
c. Working Capital:
Working capital = CA – CL
It should be positive.
For year 2010:

= 2100 – 620
=1480
For year 2011:

=2300 – 920
=1380
For year 2012:

= 2450 – 960
= 1490
For year 2013:
= 2600 – 1020
=1580
Trend of working capital is as follows:
1. Profitability Ratios:
Profitability ratios measure the company's ability to generate a return on
its resources.
a. Gross Profit Margin

Gross profit margin indicates how well the company can generate a
return at the gross profit level. It addresses three areas -- inventory
control, pricing and production efficiency.
Gross Profit Margin = Gross Profit / Total Sales

= (Sales – Cost of Goods Sold) / Total Sales
Assuming: Cost of Goods Sold to be as follows:
For year 2010, cost of goods sold is = 800

For year 2010:

Gross Profit Margin= (Sales – Cost of Goods Sales) / Total Sales
= (1500 - 800)/ 1500
= 0.46
For year 2011:
= (2000 - 1200)/2000
= 0.40
For year 2012:
= (2600 - 1500) / 2600
= 0.42
For year 2013:
= (3700 - 2000) / 3700
= 0.45
Trend of GPM is shown below:
b. Net Profit Margin

Net profit margin shows how much net profit is derived from every
dollar of total sales. It indicates how well the business has managed
its operating expenses.
Net Profit Margin =Net Profit / Total Sales
For year 2010:

= 539.46 / 1500
= 0.37
For year 2011:

= 1259.46 / 2000
= 0.62
For year 2012:

= 1665 / 2600
= 0.64
For year 2013:

= 2547 / 3700
= 0.68
It is graphically shown below:

1. Debt Management Ratio:
This is an indication of the company's ability to satisfy its debt obligations
and its capacity to take on additional debt without impairing its survival.
a. Debt Ratio:
A ratio that indicates what proportion of debt a company has relative
to its assets.
Debt Ratio = Total Liabilities / Total Assets
For year 2010:

= 1220 / 4100
= 0.29
For year 2011:
=1470 / 4350
= 0.34
For year 2012:
= 1770 / 4650
=0.38
For year 2013:
Debt Ratio = Total Liabilities / Total Asset s
= 2020/ 4900
= 0.41
Trend of debt ratio is shown below:
6- References
 www.wikipedia.com
 www.pasha.org.pk
 www.scribed.com
 http://womeninbusiness.about.com/od/freebusinesscour
ses/a/finfeasibility_2.htm
 www.whatis.com
 IT professional’s reviews from www.Google.com


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FEASIBILITY REPORT OF SRS TECH

SIR WASEEM AHMED

SABEEN JAVAID (2007-NUST-BIT-147)

SABA MANZOOR (2007-NUST-BIT-90)

RASHID ALI (2007-NUST-BIT-138)

RIZWAN ALI (2007-NUST-BIT-49)

Feasibility Report for SRS Tech Page 1

3.2 Launch of a New Software

4.1 Market Segmentation

4.2 Market Analysis

4.3 SWOT Analysis

4.4 Competitive Edge

4.5 Main Objectives

5.1 Require Assets

5.6 Ratio Analysis

•Debt Management Ratio

Feasibility Report for SRS Tech Page 3

Feasibility Report for SRS Tech Page 4

1.1Estimated Size of IT Industry

1.2 Software and Services sector with 41% Growth

Feasibility Report for SRS Tech Page 5

Sectors and countries have achieved in 15-20years, Pakistan’s technology scene is

Feasibility Report for SRS Tech Page 6

Projects to create the set of standards and services that

Directed and easy to use software that are used for

Educational purposes and for meaningful exchange of

Technology skills between Techies and people having

Outsourcing is an arrangement in which one company provides services for another

3.1 Prospecting Projects:

3.2 Launch of a New Software:

Feasibility Report for SRS Tech Page 9

4.1 Market Segmentation:

a. IT Intensive Corporate – The corporate and commercial businesses that are

4.2 Market Analysis:

Feasibility Report for SRS Tech Page 10

4.4 Competitive Edge:

Feasibility Report for SRS Tech Page 11

4.5 Main Objectives:

Note: All figures are in (000) Rs

5.1 Require Assets:

A/C Receivables 500

Prepaid Rent 600

Bill Boards 100

Total Current Assets 2100

Total Fixed assets 2050

Total Assets 4100

5.2 Means of Financing:

Partner’s Names Equity in Rupees

Ms. Sabeen Javaid 720

Ms. Saba Manzoor 720

Mr. Rashid Ali 720

Mr. Rizwan Ali 720

Feasibility Report for SRS Tech Page 13

5.3 Expenses incurred at start of SRS Tech:

Expenses heads Amount in Rs

Legal formalities 100

Marketing Campaign 300

R & D Fund 2000

Advance Rents 500

Other expenses 240

Total startup expense 7390

Cash in hand required 610

5.4 Projected Balance Sheet:

Projected Balance Sheet