Answer:
For better understand our lesson on this module, would you try to answer the Case Study of YVONNE’S PARLOR. Yvonne Lincoln was considering an investment in a small beauty parlor. She could get all the required equipment second hand from her cousin at a price of only Php 750,000. Her cousin was leaving for the Pangasinan. She decided to convert her unused garage to a beauty parlor. This would cost her another Php 750,000. For working capital, Yvonne needed about Php 150,000 more. Yvonne figured that she could service about five beauty clients a day on weekdays (5 days) and 10 beauty clients a day on weekends (2 days). (There are 52 weeks in a year.) Each client would pay an average of Php 500. Aside from the beauty clients, Yvonne could earn Php 10,000 a week from haircuts which required no materials. Yvonne determined the following expenses: Variable Costs (Materials) per Beauty Client Php 100.00 Salary of Helpers (13 months) Php 30,000/month Electricity and Water (12 months) Php 20,000/month Others (12 months) Php 15,000/month Yvonne would depreciate her equipment and leasehold improvements over five years. With these numbers, Yvonne determined her income statement. (She made no provision for taxes). The question in Yvonne’s mind was – would the investment be worth it? Would her time be worth it considering she was not charging any salary from the business? How soon would her cash payback be? What would be her Net Present Value at a discount factor of 20% if her project had a lifespan of five years
